corporation tax

[sgtbilko]

Hi all,

Can anybody clear up a query regarding corporation tax?

My Ltd company will have been running for a year in May 2007 when, I believe, corporation tax will be payable on profits. Lets say my profits are £20,000 (which is sitting in the company bank account). If I pay 19% to the taxman leaving £16,200 in the account, how do I get this sum out of the Ltd company account without paying tax on it? If I take it as wages or dividend assume I have to pay tax/NI on it again.

many thanks

[Ardesco]

I belive you can fudge it a bit in the first year so that your tax liability is substantially reduced. I suggest talking to your accountant

[expat]

Hi all,

Can anybody clear up a query regarding corporation tax?

My Ltd company will have been running for a year in May 2007 when, I believe, corporation tax will be payable on profits. Lets say my profits are £20,000 (which is sitting in the company bank account). If I pay 19% to the taxman leaving £16,200 in the account, how do I get this sum out of the Ltd company account without paying tax on it? If I take it as wages or dividend assume I have to pay tax/NI on it again.

many thanks

At risk of annoying the crap out of you by being overly pedantic, you do not have any profits. Your company might, and it will pay tax on it. You may then have salary, and you will pay tax on it. Nobody pays twice, strictly speaking.

Corporation tax is the price your company pays for being allowed to have this incorporation structure with limited liability. If that price is too high, don't pay it: either don't incorporate a limited company, or more simply don't retain any profits.

[sgtbilko]

nah, not annoyed in the slightest!

so if I draw the money out of the company in the form of salary or dividend before my company's year end, thereby ensuring non-existent profits, the company won't have any corporation tax to pay.

[Pondlife]

nah, not annoyed in the slightest!

so if I draw the money out of the company in the form of salary or dividend before my company's year end, thereby ensuring non-existent profits, the company won't have any corporation tax to pay.

Correct (if drawn as salary) but YOU will have an income tax/NI liability for the money withdrawn.

If as dividends then yes you pay CT on the value as these are taken from profit.

If you have an accountant then they really should be telling you these things (it's what you pay them for). If not, I'd get one.

HTH

[sgtbilko]

I know i have to pay tax and NI on wages and I know I will pay tax on dividends, my only query was on corporation tax which I wanted to get straight in my head, thanks anyway

[boredsenseless]

I know i have to pay tax and NI on wages and I know I will pay tax on dividends, my only query was on corporation tax which I wanted to get straight in my head, thanks anyway

You pay CT at 19% (unless you have made an awful lot of profit) of the value of the companies profit.

From the remaining 81% you can choose to either pay dividends or retain the cash for investment in subsequent years.

Any dividend paid will be subject to personal taxation you have to pay this out of your own funds not the company's.

Any dividends you pay from this years profit but before the end of the financial year have to fit within this 81% if you pay dividends over this figure then they haven't come out of profits and can't be dividends

[sgtbilko]

You pay CT at 19% (unless you have made an awful lot of profit) of the value of the companies profit.

From the remaining 81% you can choose to either pay dividends or retain the cash for investment in subsequent years.

Any dividend paid will be subject to personal taxation you have to pay this out of your own funds not the company's.

Any dividends you pay from this years profit but before the end of the financial year have to fit within this 81% if you pay dividends over this figure then they haven't come out of profits and can't be dividends

Thanks very much for that, It makes sense now!

[Nixon Williams]

Corporation tax bills are quite often large and so painful, however it is the overall tax take you should be looking at and do not get too worked up what each particular tax is called.

We advise our clients (who are not caught by IR35) to keep a low salary and the remainder in dividends, overall this will leave you with most in your own pocket rather than the Revenue.

Alan

[sgtbilko]

Corporation tax bills are quite often large and so painful, however it is the overall tax take you should be looking at and do not get too worked up what each particular tax is called.

We advise our clients (who are not caught by IR35) to keep a low salary and the remainder in dividends, overall this will leave you with most in your own pocket rather than the Revenue.

Alan

Thanks for the advice, basically, what i've done so far is pay myself and my wife ( a fellow director) about a £1000 per month each. This is to ensure that, together with expenses we have enough to live on. I intend, like you suggest, to pay a dividend (at the end of the year) out of profits.

I know that some people pay themselves the minimum wage and very large dividends to minimise tax/NI but surely this would mean paying a dividend monthly in order to provide a living income. Is it OK to do this?

many thanks