Tokyo-Saint Posted 19 November, 2012 Share Posted 19 November, 2012 Dear Lounge accountants & intellectuals, I have strayed away from the Muppet Show for a while as I need some advice. I have a 50% stake in a company and we are considering changing the company's status to 'not for profit'. The idea is that we will sacrifice taking a dividend for a set period (probably 10 years or so), build up the companies assets/balance sheet, then revert to becoming a regular Ltd company again and either sell the business or sell off the assets, making a profit at that point. I was wondering if anyone had any expertise or advice on doing this. The advantages of making the transition is obviously the tax breaks with the sacrifice being the annual dividends. Any sensible advice greatly appreciated, any non sensible advice, please keep it funny. Kind regards Tokyos Link to comment Share on other sites More sharing options...
anothersaintinsouthsea Posted 19 November, 2012 Share Posted 19 November, 2012 I don't think there are separate categories. If you make cash/profits they are yours to spend as you see fit. If you want to re-invest in the business that's up to you. Link to comment Share on other sites More sharing options...
CB Saint Posted 19 November, 2012 Share Posted 19 November, 2012 No need to change status, although you will still need to pay corporation tax, unless you own the Starbucks franchise. Link to comment Share on other sites More sharing options...
Tokyo-Saint Posted 19 November, 2012 Author Share Posted 19 November, 2012 (edited) Cheers for the replies. It is an idea put forward by my accountant but with the statement "I am not an expert in this but you might want to look into". Without going into too much detail, we work in a very niche field where the rules on VAT are not 100% clear. The latest ruling says something along the lines of "will be announced in due course", this was 2 years ago. We work as an agent, making a margin and supply mostly to VAT exempt companies. The problem is, this means if we do charge VAT, we will not be able to pass it on to them as they will not be able to claim it back. Our competitors do not charge VAT, although our accountant believes this to be a very high risk strategy. By changing our status to 'not for profit', he believes that this will mean that we do not have to charge VAT at all. The problem is we will not be able to take money out, except for wages. This is fine as long as we can build up the assets on the balance sheet and at some point change back to a regular LTD and sell those assets. It falls along these lines http://www.hmrc.gov.uk/charities/vat/index.htm and http://en.wikipedia.org/wiki/Nonprofit_organization Edited 19 November, 2012 by Tokyo-Saint Link to comment Share on other sites More sharing options...
Clapham Saint Posted 19 November, 2012 Share Posted 19 November, 2012 I think your accountant has completely misunderstood the principle of a not for profit company. He is however correct that he is not an expert. Link to comment Share on other sites More sharing options...
Tokyo-Saint Posted 19 November, 2012 Author Share Posted 19 November, 2012 Thanks Clapham, I had hoped you would reply. He has been less than useful really. I don't suppose you are looking for business? Need someone that understands the EFL business, VAT and TOMS. Link to comment Share on other sites More sharing options...
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