Urban Art Association

it goes in the fixtures and fittings

^ true story .....

fingerz i think going to jail is a little wide but i will let you know the outcome!

Not true, the art can be bought as an asset for the company, no different than investing company profits. As long as the work is insured, you are fine.
I run a limited company and have done alot of work on this, the company is registered at my address and the "company" art is also kept there with no complications whatsoever.

The art is bought with company profits, with receipts / invoices lodged with accountant verifying purchase of company assets, any sale of these pieces is company profit and liable for tax.

why dont you ask your accountant , i'm sure he/she will know

Possible tax liability on a Company asset made available for private use.

Just be carefull to leave enough in your accounts for your year end reconcilliations, its very easy to get carried away with looking at a business account and getting frisky until the cheecky tax bill comes in mid december..... I got caught out first year and only made it by the skin of my teeth.

can you ask him about the vat implications for me

ta

being a bit thick can i ask something

if i bought something for say £200 and have the receipt etc

my business can buy this off me for £200

then it can sell it at market price of say £50

therefore my business takes the hit, not me?

First point is it's your company so it needs funding somehow and unless it makes a profit somewhere else you've just used your own money to buy something and then sell it to yourself.

Then assuming you do have profits from other sales within the business you would need to potentially charge vat and prove that the sale to yourself was at arms length I.e. Fair Market value otherwise it wouldn't be allowable for income tax deduction

These are just a couple of simple points, it then gets a lot more complicated. Bottom line is there probably isn't a loop hole and if there is it may not actually help as much as you think plus the hassle factor and possible fines, interest and worse makes it one to stay away from ;D

wow this is something ive been thinking about for a while and am quite keen to hear the outcome on. Im interested not because I think it will make buying cheaper but to see if it is a legit way to spend my companies cash as technically you cant spend your company profit on non work related bits. In other words ill have legit access to a pool of funds to purchase with, without worrying about my personal account situation.

Dont believe some of these posts above are correct
Art is not an item that can be offset against expenses and is accounted for very differently as a "long term asset"
I briefly looked into this and concluded that there are no benefits in buying art thru a company

Mouser

I've been busy with my quill pen

Like I say at the end, everyone's circumstances are and every scenario is different, so I'm sure what works for you is best for you. Here is my view of things...


Mr Hubblebubble owns Hubblebubble Ltd a private ltd company that he runs from home. The company doesn't trade in art therefore purchase of art is not a company expense that can be offset against tax. Mr Hubblebubble has had a good year at Hubblebubble Ltd and has £50k of profit in the company after he has paid himself his full salary at lower rate tax thresholds. Mr Hubblebubble is an art lover, knows a good deal when he sees one and has his eye on a Banksy canvas at £50k. He's sure it will be an asset and hopes it will go up in value. This proves to be true, with the Banksy canvas trebling in value in two years.

Question. Is it better to buy, own and sell the asset as Mr Hubblebubble or as Hubblebubble Ltd.

So, as Mr Hubblebubble, he needs to pay higher rate tax on the £50k before he can buy the canvas (assuming he’s already paid the corporation tax and is buying the canvas with retained profit) . Therefore he has to pay £12,500 to withdraw the £50k (this is a worst case scenario – he would have to pay much less, for instance if he had the money already in say, ISAs, or bought with an inheritance). He then buys the canvas (being smart, he owns it jointly with Mrs Hubblebubble) and it is his to enjoy/send to Mr Frameman/post pics on the forum as he wishes. When he sells it, two years later, it has increased in value by £100k to £150k. This represents a £100k capital gain. His allowance is £10.5k per annum which he isn’t allowed to roll over, (but, seeing as he owns it with Mrs Hubblebubble they get two lots of £10.5 allowance) therefore he has to pay capital gains tax on the balance of the gain over the two years he's owned the canvas (£79k). Mr Hubblebublble is a higher rate taxpayer so his CGT is 28% on half of £79k which is is £11,060. Mrs Hubblebubble is a lower rate taxpayer so her CGT bill is 18% of her half of £79k which is £ 7,110. Therefore, the cost of owning the Banksy canvas to Mr Hubblebubble as a private individual has been £ 30,670.

Now let's say Hubblebubble Ltd buy the same Banksy. The piece is classed as an asset so results in no deduction from the company tax bill. The company buys it and holds it, the only difference being - at this point, that Mr Hubblebubble has saved himself £12,500. Two years later, on sale, the company has a £100k profit on its books that Mr Hubblebubble wants to take out of the company. To do this he must now attempt to withdraw this £100k from the company. The cost of doing that is firstly 20% corporation tax, which is £20k. Then, to get the remaining 80k of profit out of the company he must pay another £20k in higher rate tax as a personal liability. Add to that the taxman can legitimately claim that Mr Hubblebubble has been enjoying his art as a benefit in kind - it's been at his house hasn't it, on his walls - and Mr Taxman (not Mr Frameman) comes calling for a further 40% of 20% of the market value of the piece when purchased per annum (which is the benefit in kind rate of tax). So that’s £4,000 per annum Mr Hubblebubble would have to pay just for hanging the Banksy on his wall. So, this makes the total cost to Mr Hubblebubble of his company, Hubblebubble Ltd, owning the Banksy canvas £48,000.

So, buying the art privately, Mr Hubblebubble gains £100k at a cost of £30,670 making a net gain of £69,330

Buying the art through Hubblebubble Ltd, Mr Hubblebubble gains £80k at a cost of £48k making a net gain of £32k.

Of course, every scenario is different so there is no cast iron sure way nailing this down. But, IMHO and with the advice I’ve had, I think it’s best to own the art (if it’s going to increase in value) outside of your limited company.

HB

a woman's work is never done....

So, all in the answer to the original question asked is, yes its Ok to buy art through a limited company if done right and you are willing to accept less hypothetical profit than buying it personally and accepting the current taxations etc vs biting the bullet later.

(what happens if your piece looses value and you have to sell for a loss? you'd still be liable for the higher tax rate as youd taken it out as personal cash, but limited damage if done through company ?)