Cash sitting in Co account- what to do with it?

[northernladuk]

This "just do a search" is getting very tiresome. I've done search after search but I can't find hardly any help with what to do with company cash.

I'm considering a plan 'B' with the money in my company account but have been advised by my accountant that I need to set up a new business (to avoid 'running multiple business activities through one company'). Therefore I can either a) take the money out but get clobbered on personal tax or b) loan money from one company to another (but I don't understand what happens if plan 'B' fails & the new company can never pay back the loaning company).

A straight forward answer seems out of everybody's reach apart from 'do a search'.

LOL Doesn't the fact that you do your search, lots of threads come back and there is still no answer is telling you something? You do have to apply a bit of common sense along with searches. If there are lots of threads, no answers then it is pretty obvious the answer isn't going to come from posting another thread and there is no straightforward answer. backatcha brightspark

[Swamp Thing]

Oh yeah, good suggestions but what do I do with the other 40 grand that's sitting in my company account?

1. Get your company accounts up to date with your accountant
2. Pay any o/s liabilities (CT, VAT, directors' loans)
3. Draw out any monies owing to you from the company (e.g. you may have loaned the company your own funds in the past)
4. Dissolve the company, take the cash and remember to file as a Capital Gain in your next SA return. You can offset the current £10,100 CGT exemption against your £40K. Keep some money aside to pay your CGT bill at your next tax return (likely to be around £8K)
5. If you want to be really creative and fancy your chances, and you're married, gift half of your company shares to the missus, allow a respectable period of time to elapse before dissolution. Then make use of 2 x CGT exemptions and reduce overall CGT.

[Wanderer]

1. Get your company accounts up to date with your accountant
2. Pay any o/s liabilities (CT, VAT, directors' loans)
3. Draw out any monies owing to you from the company (e.g. you may have loaned the company your own funds in the past)
4. Dissolve the company, take the cash and remember to file as a Capital Gain in your next SA return. You can offset the current £10,100 CGT exemption against your £40K. Keep some money aside to pay your CGT bill at your next tax return (likely to be around £8K)
5. If you want to be really creative and fancy your chances, and you're married, gift half of your company shares to the missus, allow a respectable period of time to elapse before dissolution. Then make use of 2 x CGT exemptions and reduce overall CGT.

Some good advice, but:

1. Accounts are already up to date. The retained money is for CT and VAT, about 15k is retained profit in the company.
2. CT and VAT aren't due yet. I could pay them now, but the point that every LTD company director gets to is when they have money retained for things like this but not due to be paid out yet. What do we do with it in the meantime? Pay taxes early? Perish the thought!
3. What if you are getting close to the higher rate tax limit and you want to retain the profits without paying them out and hitting the 40% tax charge?
4. The company is still trading so I can't dissolve it and start a new one because my understanding is that I wouldn't qualify for the ESC-C16 if I start a new company the next day.
5. I may consider that option one day, but see the answer to 4. above.

A straight forward answer seems out of everybody's reach apart from 'do a search'.

I feel your pain.

If there is no good answer to this question then that's fine. Let's make a sticky saying so or else people are going to keep asking the question. No one likes to see a big wodge of money in an account they control and not being able to figure out a use for it!

I'm considering a plan 'B' with the money in my company account but have been advised by my accountant that I need to set up a new business (to avoid 'running multiple business activities through one company'). Therefore I can either a) take the money out but get clobbered on personal tax or b) loan money from one company to another (but I don't understand what happens if plan 'B' fails & the new company can never pay back the loaning company).

I wonder what on earth is the problem with running multiple business activities through one company. I understand that HMRC would love it if we took the profits from our business, paid CT/PAYE/NI/VAT to them and then invested whatever was left in setting up a separate business as a different LTD but why on earth would you do this? Likewise, I'm sure the accountants would prefer us to have two LTDs so they do two lots of admin and charge two lots of fees (for about 1.5 x as much work) rather than having a single LTD with more complex business affairs.

Gaz_M, if plan B is running under the same LTD company then I'm pretty sure you can write off losses against the plan A income. The government is all for small businesses getting up and running and understands that sometimes (in fact, quite often) they fail. I'm pretty sure there is a sympathetic tax treatment in this situation (a tax write-off against the profitable parts of the company), so it's worth a punt.

Surely it's better to trade through a single company and offset the startup costs of one activity against the profits of the other activity under the same company? You may do well to visit a small business advisor and try and find some professional, impartial advice about what is the best way forward.

[Alan @ BroomeAffinity]

You could pay it into your offset mortgage. Following an argument about this recently, I did some research and found that, providing the paperwork is correct, your company can have its money held on deposit in an account in someone else's (ie, your) name. There's a thread on this forum about it.

[Gaz_M]

Gaz_M, if plan B is running under the same LTD company then I'm pretty sure you can write off losses against the plan A income. The government is all for small businesses getting up and running and understands that sometimes (in fact, quite often) they fail. I'm pretty sure there is a sympathetic tax treatment in this situation (a tax write-off against the profitable parts of the company), so it's worth a punt.

Surely it's better to trade through a single company and offset the startup costs of one activity against the profits of the other activity under the same company? You may do well to visit a small business advisor and try and find some professional, impartial advice about what is the best way forward.

Thanks for the reply Wanderer.
Because my 'plan B' involves investment my accountant told me that different rules apply & I would need to re-classify my company for VAT & Companies House purposes. They also told me that the profits of one activity cannot be offset against losses of a separate activity. Therefore they 'strongly' recommend setting up a separate company but said I could transfer funds from company 'A' to company 'B' as long as that loan is repaid once monies are available (hence my question: I have no idea what happens if plan B fails & I cannot repay it!).

I would just love the opportunity to use some of the funds my company has gained over the last few years but getting hold of it almost seems impossible without heavy penalties.

[Olly]

You could pay it into your offset mortgage. Following an argument about this recently, I did some research and found that, providing the paperwork is correct, your company can have its money held on deposit in an account in someone else's (ie, your) name. There's a thread on this forum about it.

Hi,
Were you able to find out exactly what the paperwork looks like? I'd be really grateful if you could let me know a bit more. I read the thread before but the suggestion was to ask my accountant. I did and they said nope.

thanks

[THEPUMA]

Hi,
Were you able to find out exactly what the paperwork looks like? I'd be really grateful if you could let me know a bit more. I read the thread before but the suggestion was to ask my accountant. I did and they said nope.

thanks

If you want to PM me, I will provide you with the documentation.

[Alan @ BroomeAffinity]

I was just about to suggest getting in touch with THEPUMA but no need now.

[tangent]

In the past I have paid money into my offset mortgage account. Then taken it out and paid it back into the company before the company year end. Did this for years with no problems. Not even sure how HMRC could even get to know about this provided everything is straight at year end.

With the low interest rates available the last couple of yease though I have been a bit more adventurous. I have purchased zero dividend preference shares that are close to maturity in both my name and my wife's name (to utilise CGT allowances). I then realise the capital gain on maturity and pay the money back into my company before year end.

A few years ago I bought index tracking unit trusts in my company name. Did quite well with those when I eventually sold them, but they are risky of course and there is no CGT allowance, so you pay corporation tax on any gain after applying an inflation linked correction. Received dividends are not taxed though as they come with a tax credit. The one danger area here though is that HMRC could classify your company as a close investment company and hit all your profits at the full corporation tax rate instead of the small business rate. However, provided you keep the amount of investment down you should not have any problems. I had about 30k invested at one time. I may explore this again myself soon.

[t2pkid]

Admin About?

If you want to PM me, I will provide you with the documentation.

I would be interested in this. Admin, any chance of PM privileges?