Ltd Co. reserves

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Nixon Williams replied

24 January 2007, 13:02
Originally posted by pickle

Once you have had the company a couple of years and the reserve has built up to about 100k just close it down and take the reserves as a capital gain. You will get taper relief of 75%, plus your capital gains allowance, so you will end up paying about 6.5k in additional tax to get at that 100k.

This is a concession that could be refused and there are no guarantees that it will still be available when you decide to close, so be wary of planning your future around this arrangement.

You may decide to take the money, suffer the tax and invest on your own, this could well beat any potential tax savings, as the company money will be sat in an account earning 4-5% pa.

If you invested the money in the company you will put at risk the 75% taper relief as your company could be classed a "non trading"

Alan
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pickle replied

24 January 2007, 08:43
Once you have had the company a couple of years and the reserve has built up to about 100k just close it down and take the reserves as a capital gain. You will get taper relief of 75%, plus your capital gains allowance, so you will end up paying about 6.5k in additional tax to get at that 100k.

See SJD website for examples and calculations.
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the guy with the bowtie started a topic Ltd Co. reserves

24 January 2007, 08:06
Ltd Co. reserves

Ok, my position. Outside IR35 with LtdCo. I take a 'minimum wage' salary with dividends up to the tax threshold. The remainder is building up within the Company Reserve Bank Account. Demand is good (touch wood) so I anticipate this build up to continue.

As far as I can see there are the following options :

a). Withdraw some / all funds over the threshold paying the additional tax. Net amount invested (in ISA, bonds, etc)
b). Company contributions into a pension scheme
c). Leave in the bank to accumulate to be drawn annually up to the threshold (on-going into retirement)
d). Other

What do you guys / gals do ? I am trying to get the weight of the panel's opinion as to the best course of action
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