InvestEngine doesn’t deduct tax from income or capital gains on your Business Account. However, your business may need to pay tax on these investment returns.
If you are investing as a UK-based company, your returns are subject to the UK corporation tax regime.
This means that interest income (from bond ETFs, for example) and realised gains (net of losses) are potentially liable for corporation tax at 19%. However, dividend income (from equity ETFs, for example) is usually exempt from corporation tax. InvestEngine portfolios generally earn both interest income and dividend income.
You may also be able to treat InvestEngine’s fees as an allowable business expense to reduce your company’s corporation tax bill.
If your company does not prepare its accounts as a “micro-entity”, then unrealised gains and losses on certain types of ETFs also need to be declared for tax purposes each year. This additional requirement covers ETFs with more than 60% cash and other interest-bearing holdings.
Trading companies should also consider the impact of investments on their shareholders qualifying for Business Asset Disposal Relief (previously known as Entrepreneurs’ Relief) if the company is sold, or for Business Property Relief to reduce inheritance tax.
The above all applies to UK resident companies. If however your company isn’t resident in the UK, then dividends, interest and gains from your investment portfolio should not be liable to corporation or other UK taxes. Tax due will instead depend on where your company is resident and its tax arrangements with Luxembourg and Ireland, where the ETFs are domiciled.
For tax reporting purposes, at the end of the UK tax year InvestEngine provides Business Account holders with a Consolidated Tax Certificate (CTC) showing the interest income and dividend income their portfolio has earned, and a Capital Gains Tax Report detailing realised gains and losses on ETFs in their portfolio. Both documents cover the 12 months ending 5 April. You can also generate custom reports and statements from within your online account. See here for more information on Custom reports in your InvestEngine online account
Please note that InvestEngine does not intend the above to be tax advice and you should speak to your own tax adviser or HM Revenue & Customs to confirm the tax implications of investing your business cash. InvestEngine will not be responsible for any action or inaction as a result of this information.