Reply to: avoiding high rate tax

[ASB]

Does anyone know what the rate on the exit charge is?

If I recall it is charged as CGT. The key question of course is whether the company does become non resident.

You can start your search here:-

http://www.hmrc.gov.uk/manuals/CG1manual/CG13430.htm

This is one of the reasons often cited why it can be a poor idea to own property in a company.

[tay]

Great thread as I am planning on doing exactly the same thing next year. I dont want to turn the company into an investment company, just bleed it dry over a ciuple of years.

[TheFaQQer]

Just checked with my accountant who sees no problem with this plan

Also according to him I can invest in shares or property with company money
Has anyone done that ?

Has he discussed the different taxation that an investment company attracts? I'm not sure what it is off the top of my head, but there is a different tax regime for a company only doing invesments, which is what you will be doing.

[Andy2]

Just one. Once you are abroad in the tax haven can't you just take it all out in one go instead of 40K at a time?

Two reasons for that
1. Don't want to pay higher rate tax
2. Don't want IR to chase me in another country for doing a runner with company money

[Andy2]

Just checked with my accountant who sees no problem with this plan

Also according to him I can invest in shares or property with company money
Has anyone done that ?

[backlight]

Does anyone know what the rate on the exit charge is?

[ASB]

How would the IR know that I have left the UK? If I don't close the company and keep filing the accounts through accountant.
Also the country I move to may be a tax heaven like dubai etc

You may be surprised by what the IR know. In my last full investigation some scary stuff cropped up :-(

In any event the onus is on you. It's your choice. You can either ascertain what liability might be and plan ahead to avoid it or simply ignore the possibility and hope for the best.

[hugebrain]

I have about 50k cash in company. If I withdraw more than about 40k/annum (salary+divis) from the company I have to pay 25% tax on dividends.

how about if instead I keep piling up the cash in the company for say 6-7 years and then maybe retire and move abroad and continue withdrawing 40k/annum from the company.

Any flaws with this idea?

Just one. Once you are abroad in the tax haven can't you just take it all out in one go instead of 40K at a time?

[Andy2]

Potential hit on the exit charge on the retained assets when you go offshore. The IR can decide the company is not resident in the UK and hit you with this.

Also there is the tax regime in the country you have gone to to consider.

How would the IR know that I have left the UK? If I don't close the company and keep filing the accounts through accountant.
Also the country I move to may be a tax heaven like dubai etc

[ASB]

Any flaws with this idea?

Potential hit on the exit charge on the retained assets when you go offshore. The IR can decide the company is not resident in the UK and hit you with this.

Also there is the tax regime in the country you have gone to to consider.

[shelby68]

As long as you don't get classed as an investment company, which has a whole different tax regime.

Indeed, I'm not sure on that my self to be honest, even my accountant was suitably "vague" on that one as well,

[electronicfur]

As long as you don't get classed as an investment company, which has a whole different tax regime.

You wont get classed as one unless the investment income is more than the contracting income though.

I wonder what happens if you decide not to contract for a year, and thus have no contracting income. Would you then all of a sudden become an investment company?

[TheFaQQer]

Just invest the money in the companies name in the mean time, makes you a bit more, granted you'll have to pay tax on the profits but its still extra money for nothing.

As long as you don't get classed as an investment company, which has a whole different tax regime.

[shelby68]

I have about 50k cash in company. If I withdraw more than about 40k/annum (salary+divis) from the company I have to pay 25% tax on dividends.

how about if instead I keep piling up the cash in the company for say 6-7 years and then maybe retire and move abroad and continue withdrawing 40k/annum from the company.

Any flaws with this idea?

Just invest the money in the companies name in the mean time, makes you a bit more, granted you'll have to pay tax on the profits but its still extra money for nothing.

[Spacecadet]

none that i can think of... untill HMRC read this thread