Share this content
0
900

Company Profit

What to do with a large surplus, other than withdrawing in dividends

A client (director, shareholder of a Ltd company) is making handsome profit but does not need to withdraw the funds, and therefore there is a large surplus left in the accounts.

I realise it is a nice problem to have, but is there an innovative way of distributing this fund to minimise the personal tax?

Thanks

Replies

Please login or register to join the discussion.

avatar
20th Jan 2019 10:02

Give it to charity?

Thanks (1)
avatar
By Waves
20th Jan 2019 10:18

Yes. I would suggest that said client consults with a competent tax adviser.

Ideally, one who is “interested in tax and seeks to reduce his clients' tax bills”. If they claim to specialise in corporate tax law, even better.

Thanks (3)
avatar
By zebaa
20th Jan 2019 10:20

Pension ?

Thanks (0)
to zebaa
21st Jan 2019 11:17

Thanks. Yes I have already advised him accordingly

Thanks (0)
20th Jan 2019 10:56

I would be pleased to accept their offer of an interest-free loan. I can assure your client their exposure to personal tax will be mitigated by this innovation.

Thanks (1)
avatar
20th Jan 2019 13:08

One for you, one for me; two for you, one, two for me....

Distributing to whom/what?

Thanks (1)
21st Jan 2019 10:13

If they start a new company and sell their shares to it, any dividends paid to that new company will be tax free!

Thanks (0)
avatar
to Duggimon
21st Jan 2019 11:01

Interesting idea.

There’s a difference between “tax free” and “without tax effect”.

Your suggestion may be not be without tax effect. Where there are tax effects, there is the scope (if not the need) for tax planning.

Thanks (0)
By DJKL
21st Jan 2019 11:32

Do not distribute, use company as an investment vehicle, give up idea of ever withdrawing the capital and say invest long term, via company, in dividend paying quoted shares/similar.

When appropriate, in the future, have company pay dividends to shareholders as sees fit/depending upon tax position.

Whilst not eliminating tax from the holding of shares (corporate actions etc will likely trigger tax) it does allow individual to fully control his/her dividends received in say future retirement.

Not for everyone, and if cheap extraction was possible it is, imho, preferable, but if it is expected will never have need for the capital then worth considering (subject to forecast running costs of company into the future)

Even my own small part time practice has this issue, with the reduction in the dividend allowance it will be accumulating cash as we are only distributing £4,000 p.a. re 2018/2019 and in the future as I am not prepared to suffer 32.5% tax on further dividends.

Thanks (0)
21st Jan 2019 11:35

Accumulate cash, then MVL and retire. Tax 10%. Where do I send my invoice?

Thanks (0)
to Red Leader
21st Jan 2019 11:53

Thanks. Sounds like a good idea.

Thanks (0)
By DJKL
to Red Leader
21st Jan 2019 12:22

How much cash can be accumulated before ER gets tainted is the billion dollar question- my client's working capital requirement was maybe £10ok or so, they were sitting with £2.5m in the bank

Thanks (0)
avatar
to DJKL
21st Jan 2019 13:10

Even full ER is not worth $1bn! And even if it were, £2.5m in a $10bn company hardly seems substantial.

Thanks (0)
avatar
21st Jan 2019 13:13

Or just leave the county for 5 years (e.g. Dubai/HK etc.) and pay yourself a dividend in that time or marry a non-resident person and gift your shares to them and let them have the dividend à la P. Green.

Thanks (0)
avatar
to Justin Bryant
21st Jan 2019 13:24

Justin Bryant wrote:

….à la P. Green.

So... not innovative then.

Thanks (0)
Share this content