selling art via a limited company


S

Sylvian Stone

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 ?

Thanks
Neil.
 
U

usenet

Sylvian Stone said:
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 ?
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.
 
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D

David Floyd

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

DF
 
T

tim

Sylvian Stone said:
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% ?
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
 
T

Tim

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 ...
No, it is very different - under the first, the paintings
already exist; but under the second, they do not yet exist...
 
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T

tim

Tim said:
No, it is very different - under the first, the paintings
already exist; but under the second, they do not yet exist...
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
 

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