Taper relief vs Dividends

[where did my id go?]

lets just remember that access to taper relief via esc. c.16 is a concession by the tax people. They can refuse it and there is no guarantee that it will be available in the future.

[turbo]

lets just remember that access to taper relief via esc. c.16 is a concession by the tax people. They can refuse it and there is no guarantee that it will be available in the future.

Good point, I guess it makes sense to take the money out as and when you can.

turbo

[Darren@UptonAccountants]

Tax

ESC16 is a concession but they tend to grant it.....we haven't had one turned down yet!

It's a great idea, the more you retain in the company, the more you save....obviously not everyone will be able to keep most of the money in the company due to living costs, but it's certainly worthwhile in some cases.

[ASB]

Usual route when making use of taper relief is to pay a minimum salary and the rest in dividends upto the 38.3k threshold, then take the rest as taper relief.

Just wondered whether it would be more tax efficient to take a lower amount in dividends and leave a greater amount in the company, which could be taken as taper relief.

An extreme example: take a min salary of 5k, no dividends. Build up the rest and take it all as taper relief after a couple of years. - Assuming you could live on that wage for the time being.

turbo

No, because:-

1) If you don't use the lower allowance in any given year you use it forever
2) When the capital distribution is made anything over the relieved amount is the same as income

Thus if in 1 year you retain an extra 30k then you are exposing the relieved amount asd taxation. In any event the maximum you can retain per sharehold before CGT will kick in in approximately 40k - so some care need to be taken with high retentions.

Of course it is possible that the regimes will differ during the time the money is being accumulated so that could work for or against.

If you do go for esc c16 then I guess it is just possible you might be able to phase payments over a number of payments whjich might help mitigate the CGT. It's also a good ide not to have any other income or chargeable gains in that year.

From a personal perspectiv I only ever retained after using as much of the normal rate as possible, and it worked out pretty well for me.

[Mickmanus]

wind up

ESC16 is a concession but they tend to grant it.....we haven't had one turned down yet!

It's a great idea, the more you retain in the company, the more you save....obviously not everyone will be able to keep most of the money in the company due to living costs, but it's certainly worthwhile in some cases.

Do you have to wind up the company for this to work?

[Nixon Williams]

YES - The concession is granted on the basis that the company has ceased trading and will be struck off.

Alan

[boredsenseless]

YES - The concession is granted on the basis that the company has ceased trading and will be struck off.

Alan

Are there any limitations on starting up again under a different company? Otherwise it seems like a loophole that is begging to be closed

[Nixon Williams]

Are there any limitations on starting up again under a different company? Otherwise it seems like a loophole that is begging to be closed

Yes, it is a concession so it is not given as of right - abuse it and you will not get it granted.