How to pay 0% Corporation tax, allegedly.

[DaveB]

Saga and AA enjoy zero tax bill

The way that private equity owners reduce the tax payable by the businesses they buy is highly contentious.

They inject huge debts into their companies, and the interest paid on these borrowings wipes out all taxable profit - thereby minimising liability to tax.

[VectraMan]

Maybe I'm being thick, but if you wipe out your profits in interest, how do you then make money? Or are they only making money from the sale of the business?

As they say, the banks pay CT on the interest.

[n5gooner]

Maybe I'm being thick, but if you wipe out your profits in interest, how do you then make money? Or are they only making money from the sale of the business?

As they say, the banks pay CT on the interest.

I guess they can take a big div. and salary payments...

[Ardesco]

But no profit = no divi's......

[MrsGoof]

maybe they also make appropriate donations

[Maxamus]

Thats ok but not as good as me. I just dont ay any corp tax at all. Dont own a house, car is on someone elses name. I trabsfer all of my money into someone elses name/account. I have NO (ZERO) assetts and am therefore worth nothing. When the time comes i'll do the time but until then LIVIN LA VIDA LOCA!!!!!!!!

[Mustang]

Maybe I'm being thick, but if you wipe out your profits in interest, how do you then make money? Or are they only making money from the sale of the business?

I was thinking the same thing!! When I first heard the story on the news last night I was all set to run down to the Bank this morning and take out a company loan........!

[VJTheDJ]

Cool

I think the idea is that you take a HUGE loan and spend/save it as if it was salary or bonus. Then the interest on the loan is continuously paid for by the money left in your company account - This interest is subject to much tax relief so you end up paying virtually no Tax on that and your profits have gone so no income tax burden..... well dodgy but legal!

[Lewis]

I think the idea is that you take a HUGE loan and spend/save it as if it was salary or bonus. Then the interest on the loan is continuously paid for by the money left in your company account - This interest is subject to much tax relief so you end up paying virtually no Tax on that and your profits have gone so no income tax burden..... well dodgy but legal!

What about repaying the loan?

[Ardesco]

I think the idea is that you take a HUGE loan and spend/save it as if it was salary or bonus. Then the interest on the loan is continuously paid for by the money left in your company account - This interest is subject to much tax relief so you end up paying virtually no Tax on that and your profits have gone so no income tax burden..... well dodgy but legal!

Isn't a huge loan classified as BIK though? I'm sure there was a reason why you can't take out more than about £5,000 a year as a directors loan.