surplus cash investment ideas

[jmann]

Have you got life insurance and income protection? These can be purchased as company expense so worth doing.

I do have life insurance but I wasn't aware this can be purchased through company. I will look into this. Thank you for pointing this out.

Thanks for all the feedbacks guys. I guess there are lots of things to consider. Hopefully I will learn more things here.

[northernladuk]

It's a relevant life policy you are looking for. No2, although on the right track was rather vague with his advice. There a couple of threads it's been discussed in very recently. Use the search function as mentioned in the welcome FAQ section.

[WordIsBond]

Very good thought about Relevant Life Plans. Interesting discussion about a new wrinkle in Relevant Life Plans, CI cover, in this thread: http://forums.contractoruk.com/accou...ontractor.html. He never got back to us.

Aviva is a big name, though. An insurance business is built on trust. If people can't trust them, they'll die. So if this is challenged by HMRC and they lose, I think they would probably need to cover their clients' tax losses, even if they have protected themselves legally. The alternative would be to lose credibility in the market.

So if you want Critical Illness cover, you can probably do that through your business also, with the new Aviva product.

[jmann]

I will look into this. What I currently need is advise on extracting the surplus cash in most tax efficient way. Any other ideas?

[WordIsBond]

I will look into this. What I currently need is advise on extracting the surplus cash in most tax efficient way. Any other ideas?

I suppose the point is that if you are paying for life insurance (and CI cover) out of personal funds, and you could be paying for it out of company funds, to switch IS extracting cash in a tax efficient way. Admittedly, a relatively small amount of cash compared to your £700K. But the only things you can do tax efficiently that are going to get large sums out are pension, shares/dividends for spouse, or close the company down and use ER (but then you have to stop contracting for a while, and I doubt you are ready to retire yet).

So the first step is to do the big things (shares to spouse, pension), second step is to do the small things (like a Relevant Life Plan), third step is to try to get a better investment return on what can't be extracted efficiently.

As to investing in shares, you said something above about running into trouble with your company being seen as an investment company rather than a trading company. I do not know the rules on this at all, others here probably do. But as long as you keep contracting, and if you give your wife shares so that you can distribute more dividends, your trading income is likely to dwarf your investment income for a long time to come. So from a common-sense perspective, you shouldn't have to worry about this. But the rules don't necessarily match common sense. I would either investigate the rules or pay for expert advice on them (your company can afford to pay a tax / legal expert who is a specialist in this area).

[northernladuk]

I will look into this. What I currently need is advise on extracting the surplus cash in most tax efficient way. Any other ideas?

ADVICE

[jmann]

I suppose the point is that if you are paying for life insurance (and CI cover) out of personal funds, and you could be paying for it out of company funds, to switch IS extracting cash in a tax efficient way. Admittedly, a relatively small amount of cash compared to your £700K. But the only things you can do tax efficiently that are going to get large sums out are pension, shares/dividends for spouse, or close the company down and use ER (but then you have to stop contracting for a while, and I doubt you are ready to retire yet).

So the first step is to do the big things (shares to spouse, pension), second step is to do the small things (like a Relevant Life Plan), third step is to try to get a better investment return on what can't be extracted efficiently.

As to investing in shares, you said something above about running into trouble with your company being seen as an investment company rather than a trading company. I do not know the rules on this at all, others here probably do. But as long as you keep contracting, and if you give your wife shares so that you can distribute more dividends, your trading income is likely to dwarf your investment income for a long time to come. So from a common-sense perspective, you shouldn't have to worry about this. But the rules don't necessarily match common sense. I would either investigate the rules or pay for expert advice on them (your company can afford to pay a tax / legal expert who is a specialist in this area).

Thank you for the suggestions. It has been very helpful. I have already contacted couple of IFAs but I want to do my own research before meeting them.

I am planning to setup pension account. I am also planning to setup 2nd limited company under my wife's name so I don't think gifting shares from existing company would make any sense. I will need to talk to my accountant and IFA regarding this. I have already setup high interest saving accounts. Can I do anything else to extract surplus cash or earn more from it?

[northernladuk]

Not wanting to be rude I think it's time to go talk to the professionals. You've had lots of random ideas on here, some of which comes with risks you need to know about. Using ideas from a bunch of contractors with that amount of money really isn't a good idea.

Get a number of pros on board and see what they suggest. Remember not to let the tax tail wag the dog though.

[cojak]

And on that note I think it's time to close this thread.