Share buy back

[pickle]

Seems I "waste" my Capital Gains allowance most years (on account of shoving my spare cash into Party Poker instead of the stock market - but thats for another thread).

Anyway, I know that when I close my company down I can take the remaining cash as a capital gain.

Any reason why my company cannot "buy back" some of the shares it has issued to me? This would allow be to use up my CG allowance each year and save some of my lovely lolly from Hector's greedy grasp.

eg, company currently has 90k in assets (ie mainly cash in bank). 10 shares issued to me. Company buys back 1 share for 9k. Share was originaly brought for £1, thus i incur a capital gain of £8999, which, with my CGT allowance I can take tax free.

Im sure theres a good reason this cant be done (or else everyone would do it). Any of the sharp tax minds on here know why not?

Pickle in "tax dodging scum" mode.

[Ruprect]

i think for hector's purposes you should refer to yourself as Pickle in 'maximising tax efficiency' mode

[simondolan]

Seems I "waste" my Capital Gains allowance most years (on account of shoving my spare cash into Party Poker instead of the stock market - but thats for another thread).

Anyway, I know that when I close my company down I can take the remaining cash as a capital gain.

Any reason why my company cannot "buy back" some of the shares it has issued to me? This would allow be to use up my CG allowance each year and save some of my lovely lolly from Hector's greedy grasp.

eg, company currently has 90k in assets (ie mainly cash in bank). 10 shares issued to me. Company buys back 1 share for 9k. Share was originaly brought for £1, thus i incur a capital gain of £8999, which, with my CGT allowance I can take tax free.

Im sure theres a good reason this cant be done (or else everyone would do it). Any of the sharp tax minds on here know why not?

Pickle in "tax dodging scum" mode.

Yep, can be done, but a fair amount of work. Mail me at the usual and I can give you a quote and some details.

[ASB]

Pickle in "tax dodging scum" mode.

Pickle, I umderstand that it is one of the things you can get pre transaction approval for from the IR.

The funds you are distributing as a capital payment have already suffered CT @ 19%. There is only only really any point in going down this road if you have already got to the top of the 22% income tax band.

You might also want to consider the merits of a share split afterwards so that you can repeat the process with < 11% of the assets in the future.

[pickle]

thanks guys

[QUOTE=ASB]is only only really any point in going down this road if you have already got to the top of the 22% income tax band.
QUOTE]

Indeed, I limit myself to exactly the top of this band each year. Hence the build up of funds in the ltd co. I know I will get 75% taper relief when I close the co down, but this will still leave me with some liability due to the amount that is actualy in the bank. Hence the investigation of this approach.

Simon, thanks, I will see an email shortly.

[Ganesh]

[QUOTE=pickle]

is only only really any point in going down this road if you have already got to the top of the 22% income tax band.
QUOTE]

Indeed, I limit myself to exactly the top of this band each year. Hence the build up of funds in the ltd co. I know I will get 75% taper relief when I close the co down, but this will still leave me with some liability due to the amount that is actualy in the bank. Hence the investigation of this approach.

Simon, thanks, I will see an email shortly.

Pickle, this sounds really interesting and useful. thanks.

But I dont seem to fully understand the above quote, both yours and ASBs. Are you paying too huge a salary for yourself such that you reach the 22% (or is it 23.75%) tax band?

regards,

[Hex]

But I dont seem to fully understand the above quote, both yours and ASBs. Are you paying too huge a salary for yourself such that you reach the 22% (or is it 23.75%) tax band?

You get a personal allowance of £5,035 per year which you can earn before paying tax.
The next £2,150 is subject to 10% tax
The next £31,150 is subject to 22% tax
Over this you pay tax at 40%

The upshot of this is that after you've earned more than £38,335 in this tax year you pay 40% tax. This is on either salary or dividend. Dividends are treated as having basic tax paid on them. Once you go over the £38,335 you have to pay 22.5% of the gross amount of the dividend in extra tax.

[XLMonkey]

[I]Once you go over the £38,335 you have to pay 22.5% of the gross amount of the dividend in extra tax.

correction: 32.5% of the gross amount (25% of the net)

[Hex]

correction: 32.5% of the gross amount (25% of the net)

Nope - Total tax liability is 32.5 of the gross amount. So, given there is a 10% tax credit the extra tax payable is 22.5% of the gross amount which equates to 25% of the net amount.

32.5% of the gross amount could only be the same as 25% of the net amount if the net was a larger amount than the gross.

[Bradley]

Avoidance

Yep, can be done, but a fair amount of work. Mail me at the usual and I can give you a quote and some details.

Simon - I always thought that you were specifically barred from buying back your own shares if tax avoidance was one of the reasons for so doing?