We have looked at Wise’s new features and on the face of it, everything looks pretty simple. It looks like they are avoiding complicated tax wrappers (like ISAs, or Pensions) as it seems to be closer to a General Investment Account (or GIA). For individuals, self-employed people as well as limited companies, it looks like it will work in a reasonably similar way. However, if you are going down the limited company route as an employee or director (contractors), you should be careful to ensure your account is set up correctly in line with your circumstances.
Below we have listed some key points to consider when using Wise Assets via your limited company:
Obviously like all investments, the amounts your pay in could go up or down in value. As accountants, we will leave this investment disclaimer and jargon to the professional investment advisers and IFAs and focus on your tax and reporting obligations.
Where the Wise Account is used for a limited company, the account should be in the name of the business/limited company and not the personal name of a director or employee. Much like transferring monies out of the business bank account, depositing company funds in a personal Wise Assets account can cause Directors Loan Account issues. These issues typically involved temporary tax charges under s455 as well as mandatory interest charges from the director to the company.
If you are using the account correctly the money investments remain the property of the limited company. The amount invested should therefore be recorded on your Balance Sheet under ‘Invested Assets’. If your bookkeeping software does not hold this account code, you can create it under the Fixed or Non-Current Assets category.
Assuming you do not fall into the trap of setting up the account in the name of an employee or director, tax should only become payable on the gains you make from the investments. These are reported at your year-end within your CT600 return to HMRC.
There are several variables that go into tax benefits, feel free to contact us for guidance.