Best use of funds in Business Account

[siddzy]

Dear Community.
I am an ex-contractor and am keen to get advice on what my options are for my business with c.100K in savings. This is my LTD company when I was contracting but have not been a contractor for close of 6 months now.

The savings in the business account currently earn interest income (rates are trending downwards) so it would be good to consider other options availble.

Apologies if this topic has been covered before or if I have posted in the wrong forum.

[ladymuck]

It's more one for Accounting/Legal but you avoided the bear pit of General so you'll get some decent responses.

If you don't think you'll return to contracting then you ought to look at ways to wind down the company as the ongoing costs of keeping it open will eventually erode the money you've saved.

You can either do MVL (members voluntary liquidation) to extract the cash or do something like pay a lump sum into a pension, draw down reserves over a couple of years until you reduce the assets to under 25k and then close down without the need for formal liquidation.

The option that's right for you depends on a lot of factors that are personal to you, and you'd be best off talking to an accountant and/or liquidator to get a feel for it all.

[WTFH]

Dear Community.
I am an ex-contractor and am keen to get advice on what my options are for my business with c.100K in savings. This is my LTD company when I was contracting but have not been a contractor for close of 6 months now.

The savings in the business account currently earn interest income (rates are trending downwards) so it would be good to consider other options availble.

Apologies if this topic has been covered before or if I have posted in the wrong f

I kinda get the feeling that you are asking us and then going back to whoever asked you the question to give them our answer.
In May last year you said you had already stopped contracting and were wanting to de-register for VAT. Now you are saying that it's 6 months ago that you stopped. Prior to that you would up a company a few years earlier.

I really do feel like you're not being honest with us.

[siddzy]

It's more one for Accounting/Legal but you avoided the bear pit of General so you'll get some decent responses.

If you don't think you'll return to contracting then you ought to look at ways to wind down the company as the ongoing costs of keeping it open will eventually erode the money you've saved.

You can either do MVL (members voluntary liquidation) to extract the cash or do something like pay a lump sum into a pension, draw down reserves over a couple of years until you reduce the assets to under 25k and then close down without the need for formal liquidation.

The option that's right for you depends on a lot of factors that are personal to you, and you'd be best off talking to an accountant and/or liquidator to get a feel for it all.

Thanks.

I dont want to MVL the company - circumstances can change and I want to keep the company open as I still want to be able to contract (either full-time or part-time)
On-going costs are limited as I manage accounting on my own.

What I am hoping to do is to invest the assets such that it can generate returns slightly higher than savings rate.

Thanks.

[siddzy]

I kinda get the feeling that you are asking us and then going back to whoever asked you the question to give them our answer.
In May last year you said you had already stopped contracting and were wanting to de-register for VAT. Now you are saying that it's 6 months ago that you stopped. Prior to that you would up a company a few years earlier.

I really do feel like you're not being honest with us.

No. I am being honest - I stopped full-time around April (hence VAT de-registration) did bits and pieces of work into July after which work dried up. And now am considering what my best options are - and hence seeking advice. No malicious intent here.

[jamesbrown]

What I am hoping to do is to invest the assets such that it can generate returns slightly higher than savings rate.

Bear in mind that, if you're not actively trading, YourCo will become a CIHC, which has various implications, such as removing the possibility of an MVL and removing the small profits rate for CT. Better to either MVL the company and invest personally for various tax and other reasons (acknowledging the restrictions of the TAAR) or nominally continue to trade by looking for work and keeping the distributable profits in a regular savings account.

[Yuri F]

As others have mentioned - liquidation (or alternatively: sale of business {to some random dude for a £100} after some resource drawdown and tangible asset depreciation {accelerated} to make things simpler, might be cheaper than MVL).

If Dividend Distribution (CT already paid) is not a feasible option
(e.g. this tax year already into under higher tax band on personal income perspective, specifically "Additional rate" of 39.35% for dividends)
then most likely scenarios are:
1) Capital Reduction (non-CT distribution) - although here most contractors LTDs have minimum immaterial formation capital anyway.
2) Investment return (e.g. investment account and share dealing on LSE) in form of dividends or capital gain.
3) Interest earning assets (loan, gov or corp debt financial instruments, e.g. gilts/bonds, etc.) - in a way you're already using this option.

As mentioned by others - some options may put you into CIC/CIHC area exposing to extra accounting/legal(and taxation) burden.

just calculate optimal net income (after Ltd tax and Personal income tax deductions) for your circumstances (and draw-down time horizon) for each scenario.