A director wants to extract £300,000 out of his company reserves to purchase a property for personal use.
Looking at alternative to dividends to save tax.
Any suggestions please.
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Presumably your "director" is
Presumably your "director" is also a shareholder.
What is the extent of his shareholding?
Presumably the company is trading as a going concern, and is still required?
Profit extraction-SSAS is answer
If it is a commercial property-Form a SSAS and make maximum contributions with rest borrowed. Perfect solution from tax perspective and also going forward.
£40k annual limit assuming no pension in PYs. Also i thought ca
If it is a commercial property-Form a SSAS and make maximum contributions with rest borrowed. Perfect solution from tax perspective and also going forward.
£40k annual limit assuming no pension in PYs.
Also i thought can only borrow 50% of pension value?
Personal use
The query did not specify "residential" use so the commercial property could be being used for (say) another sole trader business used by the Director?
If trade to continue
If trade (is there a trade?) to continue one simple route might (in the short term) be a loan by company to individual and then deal with P11D issue re interest and company deals with s455 tax in the short term. Not very satisfactory if protracted time to repayment but if say company wind up/ sale envisaged in next couple of years may be a solution.
Of course predicated on company having sufficient liquid funds to make loan and pay the S455 tax and individual being able to pay the tax on the BIK from his/her income and repay the loan later.
Solvent liquidation?
Potentially a solvent liquidation?
The shareholder may qualify for Entreprenuers Relief at pay 10% on the funds withdrawn. Lots of ifs and buts with this option, but worth exploring.
Happy to answer any specific queries as I am a licensed insolvency practitioner.
Trading
Potentially a solvent liquidation?
The shareholder may qualify for Entreprenuers Relief at pay 10% on the funds withdrawn. Lots of ifs and buts with this option, but worth exploring.
Happy to answer any specific queries as I am a licensed insolvency practitioner.
If there is no intention for the trade to stop, distributing in this way and opening another company will be caught be transactions in securities.
£40k limit?
Use carry forward provisions to use up previous 3 years unused allowance and if married(for instance) , include spouse as member of SSAS to do same thing-with borrowings you can easily reach the £300k required (but of course subject to it being non residential).
Thanks. So he can't do a purchase of own shares or liquidate the company,
So unless the pension route described above works, which it essentially won't if the property is a residential one, it's dividends only I'm afraid.
Needles to say you need to look at the advantages of dividends before 6 April being taxed at the lower rates currently in place.
Company house?
The property is going to be used as a second home. Some business for the Ltd company will be done from there.
Second home - but let out when not used by director, or available to him all the time? How long will this arrangement go on for?
Depending on the answers, might be as well to just buy it through the company and then declare it as a BIK, rather than vote dividends............
He'd have to liquidate prior to 5 April, which doesn't leave a lot of time. Any later than that and he'll be caught by the amendments to the transactions in securities legislation.
Yes if he doesn't mind the effect on his business of disincorporating then liquidation is indeed an option (despite what I said), but as SteLacca says he will have to be quick to avoid the rule changes designed to stop exactly this.
Calculate the tax and NI due on the BIK (including payment of council tax and services as appropriate). You might be pleasantly surprised.
Of course there's other considerations too, you'll still want the cash out one day im sure, but if its (say) a 5-10 year plan then a company house works out quite nicely.