What else can be achieved in investing funds from a company?

29 March 2018

I met a business man recently who was finding the going rather mixed. 'Could be better, could be worse' was his passing comment as we chatted about all things business, trading year ends – and, of course, money.

He had some profits and cash within his business and was exploring his options. The obvious choice was to think about making a pension contribution before the end of his business year as an allowable expense. He understood the attraction of this option; indeed, he had discussed this with his accountant, but had some future longer-term business plans which meant that he was keen to maintain capital within the company, but wanted it to work harder for him in the intervening period (preferably somewhere closer to how hard he was working).

This led our discussion on to the way companies can invest. He was aware of placing funds on deposit with the bank or building society, which as many business people will know seem currently to offer lower deposit rates for business accounts than for personal arrangements.

Another lesser known option is to place the funds on the money market with the bank. Many banks feature money market accounts on their websites, with some minimum investments usually applying. This option is another deposit type arrangement that the banks do not regularly discuss, but it usually offers a higher rate of return for a fixed period, which can be a week or two, a month, three months or longer. Each bank offers different terms and conditions, so check these, and bear in mind that it can be disconcerting when the money disappears from your current account on agreement to proceed and then reappears when the fixed rate term ends. If suitable, you can then re-agree new terms at the prevailing rates at that time.

But what else can be achieved in investing funds from a company?

Open-ended investment companies (OEICS) and stocks & shares

Just as an individual may invest cash into investment funds or individual company stocks & shares, this is also an option for cash within a company. The range of available investments is significant and offers the potential for both capital gains and dividend income, although these are not guaranteed and it is important to remember that fund values can fall as well as rise and that the capital invested is not secure.

Any dividend income received will be taxed as a trading income at corporation tax rates, as will any capital gains when they are crystallised, because companies do not have a Capital Gains Tax (CGT) allowance. Your accountant may be able to provide additional tax guidance.

It would also be important to consider your attitude to and tolerance of investment risk and capacity for loss for these funds. This may be different to your personal view of your own funds.

Any final investment proposition may be a combination of these options and it is important to remember that cash-flow is the lifeblood of any business, so be careful where money is tied up, if at all, to ensure that any capital demands of the business are met in the short to medium term.

No individual advice is provided during the course of this blog and if you would like to consider this opportunity a stage further then please let the team at Chapters Financial know.

Keith Churchouse FPFS


CFP Chartered FCSI

Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899