selling art via a limited company

Discussion in 'UK Finance' started by Sylvian Stone, Mar 11, 2005.

  1. Hi, can anyone give an opinion on the following:

    An artist wishes to sell some canvases, probably for c. £5,000 each. If he
    does it self-employed, he'll be taxed at 22% of the profit he makes.

    Now, assuming there is a limited company of which he is a director. Can he
    sell it to the company at a nominal cost, the company trades the artwork,
    and he takes out dividends at 10% ?

    Or will the Inland Revenue attack this as a dodge ?

    Sylvian Stone, Mar 11, 2005
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  2. Sylvian Stone

    usenet Guest

    Sounds OK to me, it's what anyone working through a Ltd. company of
    their own does basically. However there are some caveats:-

    Won't the new 'dividend tax' actually mean that the artist will
    pay 19% tax anyway, regardless of the rate of corporation tax?

    Remember that there are other overheads running a company, if
    there's a significant turnover he may need to register for VAT
    (thought that presumably applies for an individual too).

    The artist may lose out on pension etc. if he doesn't keep up
    sufficient NIC payments.
    usenet, Mar 11, 2005
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  3. Sylvian Stone

    David Floyd Guest

    A salary equal to the tax personal allowance secures a NI record for
    pension purposes without actually paying any contributions.

    David Floyd, Mar 11, 2005
  4. Sylvian Stone

    tim Guest

    No, this isn't how it works.

    The artist becomes an employee of the company. He does work
    (makes paintings) for the company, the company then automatically
    own the artwork and can sell them.

    The end result is that same as you suggest but the accounting is
    completely different.

    tim, Mar 11, 2005
  5. Sylvian Stone

    Tim Guest

    No, it is very different - under the first, the paintings
    already exist; but under the second, they do not yet exist...
    Tim, Mar 11, 2005
  6. Sylvian Stone

    tim Guest

    then I can't see it working.

    ISTM that the transactions
    "A sells to Ltd Company at nominal value"
    "Ltd Company sells to third party for commercial price"
    "Ltd Company pays proceeds of sale as dividend to A"

    are transactions with no business purpose except to save tax
    and can be unwound by the revenue.

    tim, Mar 11, 2005
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