Would you rather save £15,000 or £150?

< >

This is exactly the choice a client was facing when starting a joint venture with his son.

Initially, he was quite right in thinking that, by using a company that had already being formed, this would save him approximately £150 in formation costs and such like.

The company in question was dormant and had not traded for a number of years so, in his mind, all he needed to do was change the company’s name (he had already started this process) and then transfer the shares 50/50 to himself and his son.

However, after quizzing him a little further about the idea, we discovered that the company was not only non-trading, but also a subsidiary company that sat within a group of other profitable businesses.

Additionally, it also had tax losses of more than £80,000 which would have been lost forever had he done what he was proposing.

Instead, we suggested an alternative idea to him which would still give him what he wanted and, at the same time, protect the tax losses, so that they could be set-off against future taxable profits within the group.

When we next met, he brought his son with him and they both commented that our idea was a “no-brainer” and we went on to form a brand-new company, with the two of them as its co-directors and shareholders.

Even though they incurred a small formation cost of £150, our work has resulted in a future tax saving of £15,000.

If you are thinking of starting a new venture, please feel free to get in touch. You never know, we might come up with a “no-brainer” idea for you too.