Have Ltd but considering LLP for interim role...

[stek]

Well, I'm considering this role - a three monther - have limited but I am struggling to get enough bongos out of the Ltd to sort out a few personal cash issues, nothing sinister, I'm drug free now....

I'm thinking - may well be wrong - that I could do this?

1. Kind of suspend Ltd, draw nowt, income nowt, just leave it for next time.

2. Go LLP for three months.

3. Earn as Partner, as I did in 2006 - had LLP then, then I had about 72% gross to net, sort my cash issues as it's all paid as salary/fees direct to me.

4. Finish contract, shutdown LLP and clear all obligations.

5. Next contract go back to Ltd and resume warchest building.

I understand there will be personal tax issues from being emp/director - to partner - to emp/director again, am I likely to suffer unduly?

[Maslins]

Trying to translate your ghetto speak in the first para...am I right in thinking you don't want to run it through your Ltd Co because short term you want to take out more than the post corporation tax profits?

If so, I don't see how that warrants the hassle of setting up a separate entity for a few months.

If the company situation is currently fine, but you want to take a little more than the profit, then you can take a loan of up to £5k (before having to pay interest/BiK) and provided you repay it within 9 months of the year end you shouldn't have any negative tax consequences.

If the company situation is already pretty bad (eg insolvent) then might be worth speaking to an insolvency practitioner with a view to getting rid of it and starting again with a clean sheet. NB HMRC certainly won't let you get away with this many times.

[stek]

Trying to translate your ghetto speak in the first para...am I right in thinking you don't want to run it through your Ltd Co because short term you want to take out more than the post corporation tax profits?

If so, I don't see how that warrants the hassle of setting up a separate entity for a few months.

If the company situation is currently fine, but you want to take a little more than the profit, then you can take a loan of up to £5k (before having to pay interest/BiK) and provided you repay it within 9 months of the year end you shouldn't have any negative tax consequences.

If the company situation is already pretty bad (eg insolvent) then might be worth speaking to an insolvency practitioner with a view to getting rid of it and starting again with a clean sheet. NB HMRC certainly won't let you get away with this many times.

Sorry for odd turn of phrase, I normally don't ask much, just ridicule others in General...

Point one, yes, I did like the LLP I had, though it did bite me in the bum after, so I am a bit reticent.

Ltd is fine, lots of cash, but I am looking to for more like 12k, don't get me wrong I'm not desperate, I can carry on as now but like I said - what I don't want to is sail too close to wind.

Re: Loan, I am only shareholder, have long term partner, not married, not shareholder, if I make her so, can we both take 5k loan?

Ltd is fine, I want to use it in onwards, nothing like needing to wind it up, just odd that I feel so impoverished when co is swimming with cash! Looking to get a bit more out short term for specific purpose then back to normal as efficiently as possible.

[Maslins]

Ok, don't think I've understood the problem.

...so the company's fine, lots of cash/retained profits etc etc, but you need a little bit more cash personally...so what's to stop you taking a further dividend?

[stek]

Ok, don't think I've understood the problem.

...so the company's fine, lots of cash/retained profits etc etc, but you need a little bit more cash personally...so what's to stop you taking a further dividend?

40% tax? Or will I get that anyway if even I do the LLP route? I pay myself under the 40% limit as we all do which is nice and more than enough normally - just need a temporary boost to the tune of 12k...

Suppose I should outweigh 12k cost of interest against 40% tax, I know, helps to ask, helps to focus and what I suspect I already know....

[stek]

40% tax? Or will I get that anyway if even I do the LLP route? I pay myself under the 40% limit as we all do which is nice and more than enough normally - just need a temporary boost to the tune of 12k...

Suppose I should outweigh 12k cost of interest against 40% tax, I know, helps to ask, helps to focus and what I suspect I already know....

I'll PM if it helps but I suppose I should go via my accountant first, just I'm benched and thinking too much!

[malvolio]

A classic case of letting the taxation tail wag the dog.... You do despair sometimes.

The idea is to earn money for yourself. Trying to work out complicated ways not to pay tax on it is a waste of effort: for one thing, your personal tax is based on what you earn, not where it comes from.

Take the money you need out plus 30%, stick the balance in an ISA for when you have to pay upfront next year and spend the rest.

[Wanderer]

Ltd is fine, lots of cash, but I am looking to for more like 12k

If you have drawn salary and dividends up to the higher rate tax limit then I don't think a LLP is going to change that, you will still be hit at 40%.

Presuming you have sufficient retained funds in the company and you are able to pay it back either before the company's year end or in the worst case, before 9 months after the company's year end then why not just take a director's loan? If you have a lot of retained funds then you can declare a big dividend at the beginning of the new personal tax year (6th April) to repay the directors loan that way.

There is actually no limit to the amount you can take as a director's loan, though if it's over £10k then you need shareholder approval (a formality if you are the only shareholder) and if it's over £5,000, you will need to pay it back before 9 months after the company year end with interest (currently 4%). This interest becomes company profit which it can pay back to you minus corporation tax so the net cost of to you of the loan is as little as 0.8%.

Don't take a loan unless you are absolutely sure you can pay it back though.

[Maslins]

The idea is to earn money for yourself. Trying to work out complicated ways not to pay tax on it is a waste of effort: for one thing, your personal tax is based on what you earn, not where it comes from.

^^This!

If you're already at the top of the basic rate band, then yes, further dividends will lead to a personal tax liability for you (at an effective rate of 25%...unless you get to £100k+).

Earning 3 month's worth of income through an LLP wouldn't help at all. Instead you'd be taxed on this at 40%...although admittedly the profits wouldn't suffer corporation tax before you got your hands on them.

You'd also have all the aggro & cost of a separate legal entity, getting a business bank account for it, registering it for VAT (potentially), bookkeeping for it, registering self employed (as a partner in an LLP you are self employed), paying class 2 NICs, the list goes on and on.

In short, don't do it, take more dividends but remember to put a little aside for the (personal) tax man.

[stek]

Message understood, not my finest hour, liquid lunch but mainly my own thickness.....

Sorry!