Surplus cash

[molsang]

Money Managemnet

Hi All,

Besides doing a pension what do people do with surplus cash in the business.


Thanks Aj

There are multiple way you can use your surplus cash.

1. Invest to your children education
2. Pay-Off your mortgage and reduce your monthly outgoing as less as possible
3. Invest in some Emerging Countries Mutual Funds
4. Buy Gold/Precious metals like diamond/platinum jewelries etc
5. Start planning for F-I-R-E (Financially Independent Retire Early)

[Waldorf]

This got me thinking and I found this How to Invest your Company Profits - Foxy Monkey
I don't want to get into direct property myself. I was hoping moving money into shares could reduce my companies capital tax bill.
Accountant says it just looks like another bank account though (which makes sense).

I wouldn’t touch property with a barge pole, increased restrictions both, legal and taxes makes it unattractive. The prospect of rent controls and tenant rights to buy proposed by Corbyn is a further worry.

I would avoid trying to get rich quick with investments, this rarely works out especially if you don’t undertake lots of research.

I would invest in a selection of ETF’s, very cheap and lots to choose from to fit your risk profile. Vanguard offer great choices, if you were to only pick one I’d go for the FTSE All World ETF, great for investing long term. Don’t forget to use your ISA allowance each year.

[northernladuk]

There are multiple way you can use your surplus cash.

1. Invest to your children education
2. Pay-Off your mortgage and reduce your monthly outgoing as less as possible
3. Invest in some Emerging Countries Mutual Funds
4. Buy Gold/Precious metals like diamond/platinum jewelries etc
5. Start planning for F-I-R-E (Financially Independent Retire Early)

I've a feeling you've completey misunderstood the OPs situation.

[northernladuk]

I wouldn’t touch property with a barge pole, increased restrictions both, legal and taxes makes it unattractive. The prospect of rent controls and tenant rights to buy proposed by Corbyn is a further worry.

This which has been echoed by many other contractors and accountants many many times.

There is also the impending property doom if some are to be believed.

[Alchemy Accountancy]

To add to the points made already, and clear up some common misconceptions that I have heard over the years from clients (for the benefit of other readers of this forum), about investing surplus cash from your limited company (be it in property, shares or other assets):

1. The initial investment is not treated as a trading expense in your accounts, and would therefore not benefit from Corporation Tax relief at that time.
2. On the eventual disposal of the asset, you will pay corporation tax on the gain (i.e. the sale proceeds less the initial investment). Companies do not have an annual exemption for capital gains, and can no longer claim indexation allowance.
3. If, on disposal of the asset, a loss is made, this cannot be set against trading income but must be set against other gains from the same activity. If you have not utilised (set them against other gains) the losses before the company is closed, they do not transfer to you personally.
4. If the asset generates an income (i.e. rent or dividends), the company will pay tax on the income, and you will also pay tax to then extract the income from the company.
5. Holding investments in your trading company could affect your entitlement to entrepreneurs relief (assuming it is still around) come the time that you wish to close your company - though you'd need a lot of investments for this to happen. Likewise, if you wanted to liquidate the company then you would need to transfer assets (including investments) out of it in the process, causing a tax event at that point also.

Unless you need access to the cash in in the short/medium term (in which case it's debatable whether either property or shares would be a good idea - though investment advice should be sought from a suitably qualified professional) - then you could invest it in shares via a pension? That way you get corporation tax relief on the investment (into the pension) and there is no tax on income or gains as they are within that investment wrapper. Clearly there is a risk with pensions, in that tax rules could feasibly change between the investment in the pension and the drawing of it, particularly if you are looking over a longer time-horizon.

There are other threads about assets being at risk if held in a trading company and some form of claim is made against the trading company (such as IR35, case in point being Christa Ackroyd), though no more so than if the asset was cash.

[molsang]

I've a feeling you've completey misunderstood the OPs situation.

How?

[northernladuk]

How?

He wants to invest the money in his company without having to withdraw it to be tax efficient. Everything you put requires personal cash not the company money.

[molsang]

He wants to invest the money in his company without having to withdraw it to be tax efficient. Everything you put requires personal cash not the company money.

What's wrong with that? Take out the money from Business in dividends (if that cause more tax so it is) and plan a better life. I did in my life so I see my fellow contractors should do as well.

[northernladuk]

What's wrong with that? Take out the money from Business in dividends (if that cause more tax so it is) and plan a better life. I did in my life so I see my fellow contractors should do as well.

But that's not the question he's asking. Maybe he's done that and he's still got surplus cash.

[simes]

What's wrong with that? Take out the money from Business in dividends (if that cause more tax so it is) and plan a better life. I did in my life so I see my fellow contractors should do as well.

Fella, this may have been answered but the OP is asking, I believe, how to invest money while it still belongs to the business. This as opposed to taking money out as a dividend, paying Income Tax on it, and Then investing.

Company investment as opposed to Personal investment.