Making your warchest work for you

[hydraulicwave]

Making your warchest work for you

w ww.deposits.org. Not sure if a foreigner can open an account, though. Worth looking into?

[Forbes Young]

This sort of advice really riles me - An IFA will most often just sell you a fund managed by some fund manager and get his commissions. You can quite easily avoid that by just going through an ETF vehicle. These industry experts more often then not honestly have no clue including the guys who come on the radio or write columns in the newspapaer

Rather then have all contractors go to IFA's why dont you explain what advice the IFA is likely to give. The spectrum of people on these boards are all very similar - More then 10K to invest and company money not needed any time.

If you want to make it more exciting assume low risk / moderate risk / high risk so you can provide three structures

Some IFAs are better than others of course but the top ones will be able to give you comprehensive advice with different options, based on a client's overall individual position. They should be a lot more expert than the average contractor as they need to undertake comprehensive CPD each year and apply annually for their licence, to show they continue to be experts in their field. Its not about how much commission or fees you pay, its about how much net you make from an investment.

[Jack Kada]

"Can" being the operative word. Investments can also plummet in value, losing you plenty of hard earned cash. In my opinion, you should take the advice of investment experts when investing your funds (including buying/selling stocks and shares).

This sort of advice really riles me - An IFA will most often just sell you a fund managed by some fund manager and get his commissions. You can quite easily avoid that by just going through an ETF vehicle. These industry experts more often then not honestly have no clue including the guys who come on the radio or write columns in the newspapaer

Rather then have all contractors go to IFA's why dont you explain what advice the IFA is likely to give. The spectrum of people on these boards are all very similar - More then 10K to invest and company money not needed any time.

If you want to make it more exciting assume low risk / moderate risk / high risk so you can provide three structures

[IR35FanClub]

Most of what I would say is posted in here...
http://forums.contractoruk.com/accou...lush-fund.html


FWIW since I posted that I found out LondonMidland have free car parking in there stations for EVs (no charging points though) so another £1500 a year saved! As other people pointed out the cheapest method of motoring in a old banger and claim your 45p/mile. I've been doing that for 8 years and decided a new motor was in order and an EV is the most efficient for tax and running cost purposes. Went with a BMW i3 Range extender (REX) as the charging infrastructure is patchy at best so at least you have the REX as a backup to recharge the battery on the fly and can keep topping up with unleaded till you get back home. It's lovely inside, drives itself in stop start traffic uptp 25 mph, is faster than an M3 on the 0-40 and you can pre heat the interior from your smart phone so no scraping required to defrost.

I've also been to see an accountant about starting a business doing property development on land at the side of my house. Once planning permission is approved I'll be forming a new group company, and a sister "Myco construction Ltd" company. Transferring a bunch of cash from my contracting company to fund the ground works and taking on a commercial mortage for the rest [ at 8-12% and guaranteed personally by me ].

Going to build 3 flats. The best part - I am lending the land to my company to build on with an IUO, that once the flats sell gets paid back to me free of capital gains tax as it was part of my primary domestic residence. £75,000 tax free - not bad. I still have the original house - just no side garden which is only used as a drive anyway. space at the front for parking.

Any losses in the construction co can be offset against corporation tax of the contracting co - via the group. Though I expect to make £150k. That will be kept as retained profit to repeat the process/ become my alternative pension fund.

You need to be looking to buy a house with land spare if you want to do this. Ideally a 3 storey end town house - that can also be converted to flats afterwards. For about £50k, you can split the original house into 3 floors and sell it as 3 units for about 50% more than what it's worth as a single house. Council might be supportive as you are effectively creating affordable homes without using green land. I expect to make £100k on the house conversion.

You'll have to pay corporation tax on the profits. The new builds are VAT free, but conversions you pay full VAT. So I might leave that for a while and do some more house / flat building elsewhere and just rent out what is my current PDR.

Just employ a decent Building PM and carry on with the day job. Treat yourself as customer / specifier and don't get involved in something it's cheaper to employ someone else to do. Just check up everyday that some progress has been made.

The final bit I've done is started my Mrs up in business with a loan doing importing / exporting via 3rd parties. She's at home doing sweet FA and I can't earn any more money without paying 40% Tax. So I've got her on the web showed her how to get the suppliers and now she's on it. Could end up earning more than me based on profit margins! You can buy stock and have it delivered direct to Amazon for order fulfilment. Or do it from the garage in spare time till it gets up and running. Always do test order with Chinese suppliers as quality control is non existent. Expect delays from anyone... even in UK. We were told 3-4 weeks for a clothes order and 8 weeks later we still haven't had delivery.

[Chris at CrunchAccounting]

A few points

Just a few things I would like to add:

1) Make sure you are issuing dividends to take you up to the basic rate band (your accountant can ensure this - you don't want to waste your allowances).

2) Be aware of becoming an investment company (especially if you stop trading with large investments).

3) Take sound financial advice from a IFA.

4) Ensure you tell your accountant about any investment/pension contributions in advance so they can give you good tax advice.

[Forbes Young]

How about taking out a portion to play on the stock market. Some excellent growth can be realised very quickly.

"Can" being the operative word. Investments can also plummet in value, losing you plenty of hard earned cash. In my opinion, you should take the advice of investment experts when investing your funds (including buying/selling stocks and shares).

[stek]

How about taking out a portion to play on the stock market. Some excellent growth can be realised very quickly.

Then u become an investment business don't u? Different tax treatment...

[hydraulicwave]

How about taking out a portion to play on the stock market. Some excellent growth can be realised very quickly.

[Forbes Young]

I strongly recommend speaking to an IFA. They'll be able to give you some sound advice and help your money to work harder.

Nice to know you agree Daniel!

[Dan@OrangeGenie]

I'm building a healthy warchest and tend to not make any dividend withdraws unless I need to, but would like that warchest to do more than just sit there.

Any suggestions? For example is it possible to take an interest free directors loan and throw the cash into a high interest account or ISA or even a high interest business account (do they exist?)

I strongly recommend speaking to an IFA. They'll be able to give you some sound advice and help your money to work harder.

[Forbes Young]

I'm building a healthy warchest and tend to not make any dividend withdraws unless I need to, but would like that warchest to do more than just sit there.

Any suggestions? For example is it possible to take an interest free directors loan and throw the cash into a high interest account or ISA or even a high interest business account (do they exist?)

Some good points have already been made above but I would always stress the importance of discussing your overall position with your IFA (ie this will include all assets you own including your ltd company and how you are set up for pensions). A good IFA will come up with investment solutions to suit your particular circumstances.

[northernladuk]

I'd suggest you try a search for what to do with the war chest. It does tend to get asked weekly. Use the search method mentioned in the FAQ section though.

[TheFaQQer]

If you are using a directors loan, then if it goes over £10k at any stage of the year then you will need to pay interest on the loan or incur a benefit in kind charge. You also need to repay it within nine months of the year end, or pay a lump sum to HMRC on deposit. So that limits what you could do with it personally during that time.

The best you are going to get in a business account is somewhere in the region of 1.5% if you want 30 day access - you can get better rates by locking the money away for longer, but if you need it then you probably lose the benefit of higher interest.

You could start putting the money into a pension fund - employer contributions are an expense which then means you don't pay corporation tax on that money, so effectively your fund would need to lose 20% to break even.

There are a number of threads around here discussing this - including one from last week or so.

[acnm]

I'm building a healthy warchest and tend to not make any dividend withdraws unless I need to, but would like that warchest to do more than just sit there.

Any suggestions? For example is it possible to take an interest free directors loan and throw the cash into a high interest account or ISA or even a high interest business account (do they exist?)