avoiding high rate tax

[Andy2]

I have about 50k cash in company. If I withdraw more than about 40k/annum (salary+divis) from the company I have to pay 25% tax on dividends.

how about if instead I keep piling up the cash in the company for say 6-7 years and then maybe retire and move abroad and continue withdrawing 40k/annum from the company.

Any flaws with this idea?

[Spacecadet]

none that i can think of... untill HMRC read this thread

[shelby68]

I have about 50k cash in company. If I withdraw more than about 40k/annum (salary+divis) from the company I have to pay 25% tax on dividends.

how about if instead I keep piling up the cash in the company for say 6-7 years and then maybe retire and move abroad and continue withdrawing 40k/annum from the company.

Any flaws with this idea?

Just invest the money in the companies name in the mean time, makes you a bit more, granted you'll have to pay tax on the profits but its still extra money for nothing.

[TheFaQQer]

Just invest the money in the companies name in the mean time, makes you a bit more, granted you'll have to pay tax on the profits but its still extra money for nothing.

As long as you don't get classed as an investment company, which has a whole different tax regime.

[electronicfur]

As long as you don't get classed as an investment company, which has a whole different tax regime.

You wont get classed as one unless the investment income is more than the contracting income though.

I wonder what happens if you decide not to contract for a year, and thus have no contracting income. Would you then all of a sudden become an investment company?

[shelby68]

As long as you don't get classed as an investment company, which has a whole different tax regime.

Indeed, I'm not sure on that my self to be honest, even my accountant was suitably "vague" on that one as well,

[ASB]

Any flaws with this idea?

Potential hit on the exit charge on the retained assets when you go offshore. The IR can decide the company is not resident in the UK and hit you with this.

Also there is the tax regime in the country you have gone to to consider.

[Andy2]

Potential hit on the exit charge on the retained assets when you go offshore. The IR can decide the company is not resident in the UK and hit you with this.

Also there is the tax regime in the country you have gone to to consider.

How would the IR know that I have left the UK? If I don't close the company and keep filing the accounts through accountant.
Also the country I move to may be a tax heaven like dubai etc

[hugebrain]

I have about 50k cash in company. If I withdraw more than about 40k/annum (salary+divis) from the company I have to pay 25% tax on dividends.

how about if instead I keep piling up the cash in the company for say 6-7 years and then maybe retire and move abroad and continue withdrawing 40k/annum from the company.

Any flaws with this idea?

Just one. Once you are abroad in the tax haven can't you just take it all out in one go instead of 40K at a time?

[ASB]

How would the IR know that I have left the UK? If I don't close the company and keep filing the accounts through accountant.
Also the country I move to may be a tax heaven like dubai etc

You may be surprised by what the IR know. In my last full investigation some scary stuff cropped up :-(

In any event the onus is on you. It's your choice. You can either ascertain what liability might be and plan ahead to avoid it or simply ignore the possibility and hope for the best.