Withdrawing £120K efficiently?

Withdrawing £120K efficiently?

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I have been asked for advice re a company who's director needs to withdraw £120K in the next few months from his company, to repay his father (employee, not director or shareholder) for a personal loan made in prior years.

My thoughts so far:

The funds/profits are there to vote dividends to director, but he'll be stung by HR tax...
He could take a loan out from the company, but be stung by BIK....
His director's loan account is empty...
He currently takes market rate salary - a large bonus would mean high PAYE/NIC....
There is a goodwill asset of £200K on the BLS...
He could make company pmt into father's pension & he could then draw down % cash if over 65yrs??
The father could be made redundant - £30k paid & possibly be freelance in future if needed in the business.....

Any thoughts are much appreciated!
Thanks!
pixie

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By listerramjet
08th Oct 2007 14:08

I guess you can do the maths youself
for your initial thoughts but perhaps you should be aware of any inheritance tax implications if your scheme means it is possible that part or all of the original loan might be deemed a gift

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By Paul Soper
08th Oct 2007 23:29

Interesting
The payment into Dad's pension fund could be a goer if his father is interested with Dad forgiving the loan but... as suggested there are IHT complications. I can't see the redundancy idea working if Dad is approaching retirement anyway as it will be treated as a payment from an employer financed retirement benefit scheme and that prevents the £30,000 being claimed. Unlike the payment to the pension fund you would be much more likely not to get CT relief on the payment.

The dividend is probably the cheapest in reality although it will cost him £40K (£160K dividend will leave £120K net after paying HR Tax).

If he borrows from the company there would be a tax cost of 2.5% pa AND s419 as well.

Would Dad be prepared to take shares which could be repurchased from him in five years?

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