Converting to Permie (I know.....)

**ASB** · 28 May 2006, 11:16

Originally posted by silverfox

I have been offered a permanent role where I am currently contracting on a package that is as far as I can work out (Ir35calc) equivalent to my contract even inside IR35. I am likely to accept this and can't believe they matched my salary expectations.

However whilst I have been contracting I have built up a large sum in my company accounts. As I have had a couple of quiet periods in the last few years and previously used this money to keep me going!

Can anyone advise the most tax effecient way to get money out of company. I know I may have left it too late but I had thought about - Making myself redundant? and putting a large contribution into a pension. Not sure the legalities etc. Any help appreiciated.

Depends on the amounts. you can apply for ESC C16 (do a search). this will allow you to pay out the companys returned funds as a capital gain not as a dividend.

If you have been in business > 3 years then you normally get 75% taper relief.

The annual CGT exemption is 8,800 so this allows you to get out 35,200 per shareholder (after allowing for the initial cost of your shares).

If you have > this than you might wish to seek approval to buy in some of your own shares (this is then a capital gain on you). I believe that the IR will give pre transaction approval (or otherwise) for this course of action. This can enable you to split the gains over more than 1 year if needed.

Of course this is not tax free as such, it is only avoiding more tax. After all the entire retained value in the company has already had corporation tax paid on it.

There used to be a way of carry back with pension contributions that could cause you to make a current year loss and get back the corporation tax, but I think that is no longer possible.

Converting to Permie (I know.....)