Withdrawing more money without unacceptable tax bill - Imaginative advice needed

**XLMonkey** · 2 May 2006, 09:25

Mobwell, there are only two things certain in life: death and taxes. I can no more help you with the second than I can with the first.

The only legal mechanism that I've come across is to make regular, and significant, pension contributions from your company. Then, you can withdraw a percentage (25% I think, up to a limit) of your pension fund tax free when you retire. So, if you can bear to lock it away until you are at least 55, then this is a very very tax efficient way of getting money out of the company.

The best advice I can give is to be very disciplined about company expenses and knowing the rules. If you keep fully up-to-speed about the rules on what are, and are not, legitimate business expenses, then you will find that you can probably reclaim rather more than you currently do. This has enabled me to claim between 1-3k pa for the past few years that I would not otherwise have been alert to.

Most of the other mechanisms that float about are either illegal or, in some fundamental way, pretty unethical. There is a point where you just have to bite the bullet and pay Gordon what he's due.....

**boredsenseless** · 2 May 2006, 09:50

Originally posted by mobwell

I am the sole employee of my limited company and pay myself primarily by dividend for tax reasons. My accountant tells me I can pay myself about 37K a year after which my personal tax liabilites increase and I will have to pay 30% tax (40% tax minus the 10% deemed to have been paid on dividends already).
I'd like to be able to take more of my earnings out of my company (legally)without paying large amounts of tax and am very flexible about this. Does anyone have suggestions? This could be anything from pensions to somehow paying my mortgage or buying other property. I don't know anything about this area so if anyone has any ideas or can point me in a direction to do some research I would be very grateful.

You appear also to have made a mistake in your question.

I'm sure you meant to say. "I pay myself a minimum wage as required by law, and then retain any other company monies to ensure a smooth cashflow. If at times during the year I can prove the company has surplus funds, the directors vote to distribute these to the shareholders."

Paying dividends isn't illegal or bending the rules. Planning to use them to form renumeration is considered badly at the moment by HMRC but as shown above its only a matter of words. If you don't give them any reason to pick you up on paying salary as dividends they'll leave alone, however if you expressly state that you pay dividends for tax reasons expect them to come running

**mobwell** · 2 May 2006, 10:23

boredsenseless: Very good point. You are quite right. My wording was off. I'll be more precise in the future.

**mobwell** · 2 May 2006, 10:29

Could my company buy/pay the mortgage on property, and if so as I own the company would I therefore own the property?

**Gold Dalek** · 2 May 2006, 10:52

This is so 1990s!!!

In the old days you could argue about fairness... these days we are being actively targeted - Artic case, IR35, 660 etc.. I don't know if you have had an inspection recently? but the Govt seems to have adopted a "robber Baron" approach to collecting taxation...
Also:
Can a Government that cannot control its borders expect to be able to collect taxes?

If you think it's fair that those taxes are now pledged to help Africa, fight dubious wars, reward corporate Labour sponsors etc... do you think that's fair?

Ethics ... out of the window

**ratewhore** · 2 May 2006, 11:21

A colleague told me this:

He leant the company money to purchase a company car. Then the company repays him plus interest (say 12-15%).

Whether it's true or legal is, however, an entirely different argument...

**css_jay99** · 2 May 2006, 12:05

ratewhore,

there is always a paper trail when IR comes calling !. I am sure Your friend will still have to declare the interest as income in his Self Assessment

If he is not declaring it, you better tell him to do so! .

**ladymuck** · 2 May 2006, 12:11

You could make your dog (or other pet) an equal partner in the business, and pay them dividends, which would go into the joint account you have with them? Probably get caught under S660 or whatever it is!!

I think you can loan yourself a sum of money (not overly sure about how much, or for how long) but at some point you'll have to repay it and deal with the consequences!

**boredsenseless** · 2 May 2006, 12:25

Originally posted by ratewhore

A colleague told me this:

He leant the company money to purchase a company car. Then the company repays him plus interest (say 12-15%).

Whether it's true or legal is, however, an entirely different argument...

Does this guy work for you or you for him, or are you both employed by another company directly as permies?

If not then he's an associate or acquaintance not a colleague

Withdrawing more money without unacceptable tax bill - Imaginative advice needed