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Trusts and Estate Planning

Your trading company can only qualify as an SBC if the shareholders are all natural persons. There are other conditions, but this is the one that I want to deal with today.

Because of this, you would normally want yourself to be the shareholder rather than your trust. But you do want your trust owned investment company to have the profits in order to invest them. How do we do that?

It’s a bit of a balancing act. The investment company rents assets (computers, vehicles, furniture etc.) to the SBC. You have to leave enough profit in the SBC to take advantage of the tax break, so you play with the numbers until you are satisfied with the result.

The only way, apart from a taxable donation, you can get the additional, after tax profit into the investment company is for the SBC to lend it. But, because they are connected parties, s7C requires that the SBC charges interest on the loan at least at the official rate. But that rarely matters as the interest is tax deductible by the investment company and taxable by the SBC, so the loan is tax neutral.



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