Share this content
0
2945

Dividends from non-trading company

Is there any limit on how long a non-trading company can be left open just paying dividends

Didn't find your answer?

Search AccountingWEB

Retiring client whose company has cash reserves, wants to pay annual dividends of £5k until the money runs out. Is there any reason he shouldn't?

Replies (8)

Please login or register to join the discussion.

Hallerud at Easter
By DJKL
19th Dec 2017 17:37

Yes, but not killer points:

1. Tax free limit drops to £2,000 next year so may take longer than expected?

2. Will cost of keeping company open/doing accounts be greater than any tax savings?

3. Does equation change if £2,000 threshold gets dropped?

4. Can he get ER currently if company wound up?

5. As he gets older does he want the faff?

6. Tax rules can and do change- bird in hand? Greater number forecast years greater risk legislation bites him.

Key for me is how much involved, running costs, pain in proverbial.

I have a client who is going to do this with his company but it has >£3m of listed investments, he does not need the capital or income and has no children, so leaving company with dividend income of circa £120,000 p.a. works to a degree as it shelters dividend income from income tax but he and his wife still have scope to take a dividend from Co if they need a cash boost.

Thanks (1)
Replying to DJKL:
avatar
By RG
19th Dec 2017 18:18

Thanks, a very clear useful list of points for me to give him.

Thanks (0)
avatar
By AnnAccountant
19th Dec 2017 18:01

They aren't a tax deductible expense after the trade has ceased

Thanks (0)
Replying to AnnAccountant:
avatar
By jcace
19th Dec 2017 18:08

nor before!

Thanks (0)
Replying to AnnAccountant:
RLI
By lionofludesch
19th Dec 2017 18:50

AnnAccountant wrote:

They aren't a tax deductible expense after the trade has ceased

Very true.

Thanks (0)
avatar
By Matrix
19th Dec 2017 18:24

When the dividend limit decreases to £2,000 he is only saving £200 a year which surely are less than your fees for filing accounts so he may be better off paying entrepreneur's relief now, assuming he is eligible.

Thanks (0)
Replying to Matrix:
RLI
By lionofludesch
19th Dec 2017 18:53

I think 6th April 2018 may well prove a cut-off in terms of cost/benefit.

Thanks (0)
Replying to lionofludesch:
avatar
By Matrix
19th Dec 2017 19:00

And in terms of dividend tax planning!

Thanks (0)
Share this content