Originally posted by Olly
View Post
- Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
- Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!
Reply to: Company Reserves.
Collapse
You are not logged in or you do not have permission to access this page. This could be due to one of several reasons:
- You are not logged in. If you are already registered, fill in the form below to log in, or follow the "Sign Up" link to register a new account.
- You may not have sufficient privileges to access this page. Are you trying to edit someone else's post, access administrative features or some other privileged system?
- If you are trying to post, the administrator may have disabled your account, or it may be awaiting activation.
Logging in...
Previously on "Company Reserves."
Collapse
-
-
Originally posted by THEPUMA View PostThe justification is that the security of your deposit is improved. It is unlikely that your bank/lender will call in your mortgage whilst not repaying your bank deposit. I think in some cases they are obligated to "net off". From memory this depends whether the lender is a bank or building society.
PUMA
"This only counts for a net deposit, so if you had £50,000 deposited but also had a £20,000 loan with the same bank, then only £30,000 would be compensated."
Does this weaken your standpoint somewhat?
Leave a comment:
-
Originally posted by Lewis View PostI just looked and the Scottish Widows 2% headline rate includes 0.5% bonus rate which you only get as a new customer for 6 months (plus you need >£50K to get that rate). So it is really only 1.25% for <£50K and 1.5% for >£50K. Assuming you see this as more than a six month thing.
should have just gone for that one that does the average (though not sure I trust them with my bucks, they don't look too substantial)
Leave a comment:
-
I just looked and the Scottish Widows 2% headline rate includes 0.5% bonus rate which you only get as a new customer for 6 months (plus you need >£50K to get that rate). So it is really only 1.25% for <£50K and 1.5% for >£50K. Assuming you see this as more than a six month thing.
Leave a comment:
-
Originally posted by Olly View Post2.79% offset mortgage (at the mo and likely to stay low for a while)
s419 isn't a factor - we're comparing leaving money in company or using it the way you suggest. There is no further tax on dividends as I never go into the 40% band.
2% interest from Scottish widows taxed at 21% = 1.58% interest (I think)
2.79 - 1.58 = 1.21% saving
er...it might be 2.89% actually - can't remember now
If the assurances are unobtainable then I speculate that's the reason why practically no one else is doing this....shame...you had me going there for a bit.
Perhaps you know of a case where it was successfully defended after being challenged?
Whether the assurances being unobtainable puts people off I don't know. I do know that many people rely on professional advice in respect of their IR35 status rather than asking HMRC for an opinion.
I don't know of a case where it has been challenged, successfully or otherwise.
PUMA
Leave a comment:
-
Originally posted by Olly View Post"unlikley" it's words like that that strike fear in me
....I have no idea of banking law - sometimes it appears there aren't really any when banks go bust
Maybe they'd even freeze the current account balance in light of the loan
"unlikely" is also a worrying word
Leave a comment:
-
Originally posted by THEPUMA View PostI think the saving is higher than that. You are also avoiding the s419 charge or tax on dividends assuming you need the money for the longer term.
I suspect you are unlikely to get the level of reassurance you are after, so if that is a deal-breaker, it probably isn't for you.
s419 isn't a factor - we're comparing leaving money in company or using it the way you suggest. There is no further tax on dividends as I never go into the 40% band.
2% interest from Scottish widows taxed at 21% = 1.58% interest (I think)
2.79 - 1.58 = 1.21% saving
er...it might be 2.89% actually - can't remember now
If the assurances are unobtainable then I speculate that's the reason why practically no one else is doing this....shame...you had me going there for a bit.
Perhaps you know of a case where it was successfully defended after being challenged?
Leave a comment:
-
"unlikley" it's words like that that strike fear in me
....I have no idea of banking law - sometimes it appears there aren't really any when banks go bust
Maybe they'd even freeze the current account balance in light of the loan
"unlikely" is also a worrying word
Leave a comment:
-
Originally posted by Olly View PostJust thought of something else - exactly how is it more secure?
The money is going in a run of the mill current account at First Direct with govs 50K protection limit so argument only works up to that value and if the balance in corporate account exceeds 100K (isn't it?). Equally you could open multiple accounts in co. name.....
Leave a comment:
-
Just thought of something else - exactly how is it more secure?
The money is going in a run of the mill current account at First Direct with govs 50K protection limit so argument only works up to that value and if the balance in corporate account exceeds 100K (isn't it?). Equally you could open multiple accounts in co. name.....
Leave a comment:
-
Originally posted by Olly View PostOK...I'm all up for digging deeper. Though the saving is pretty small at around 1.21% (assuming all company profits extracted without tax over and above 21% CT).
For me, the real key thing would be a written letter agreeing to the process by someone who enforces the rules and has the authority to make such a statement.
As I mentioned before, if this is such an ideal solution then why don't we all immediately do it, especially as offset interest rates are pretty darn competitive. I'd imagine it's because such proof from tax authorities doesn't exist and you yourself say HMRC are likely to say it's a no go.
I suspect you are unlikely to get the level of reassurance you are after, so if that is a deal-breaker, it probably isn't for you.
Leave a comment:
-
OK...I'm all up for digging deeper. Though the saving is pretty small at around 1.21% (assuming all company profits extracted without tax over and above 21% CT).
For me, the real key thing would be a written letter agreeing to the process by someone who enforces the rules and has the authority to make such a statement.
As I mentioned before, if this is such an ideal solution then why don't we all immediately do it, especially as offset interest rates are pretty darn competitive. I'd imagine it's because such proof from tax authorities doesn't exist and you yourself say HMRC are likely to say it's a no go.
Leave a comment:
-
Originally posted by TheFaQQer View PostSo what is the justification for a company doing it?
They are moving from an account paying a low rate of interest to one paying zero rate of interest. I'm not a mathematician by any means, but I think that something is better than nothing.
I just can't see how one can argue that there is a benefit / justification to the company in doing this.
In any event, I don't think a director is obliged to deposit company monies in the highest interest-yielding deposit account. If they were, there would be a lot who had put their money in Icelandic banks who would now be skint.
PUMA
Leave a comment:
-
Originally posted by THEPUMA View PostI am a qualified Chartered Accountant and qualified with the Institute of Tax. I am a principal (the LLP equivalent of a partner) in a large firm of accountants. I have had an opinion on this specific matter from a partner in another firm of accountants who regularly writes technical articles in the tax press. I am also aware of several people operating in this manner who need to be absolutely squeaky clean as any hint of tax evasion would be career-threatening.
Leave a comment:
- Home
- News & Features
- First Timers
- IR35 / S660 / BN66
- Employee Benefit Trusts
- Agency Workers Regulations
- MSC Legislation
- Limited Companies
- Dividends
- Umbrella Company
- VAT / Flat Rate VAT
- Job News & Guides
- Money News & Guides
- Guide to Contracts
- Successful Contracting
- Contracting Overseas
- Contractor Calculators
- MVL
- Contractor Expenses
Advertisers
Contractor Services
CUK News
- Streamline Your Retirement with iSIPP: A Solution for Contractor Pensions Sep 1 09:13
- Making the most of pension lump sums: overview for contractors Sep 1 08:36
- Umbrella company tribunal cases are opening up; are your wages subject to unlawful deductions, too? Aug 31 08:38
- Contractors, relabelling 'labour' as 'services' to appear 'fully contracted out' won't dupe IR35 inspectors Aug 31 08:30
- How often does HMRC check tax returns? Aug 30 08:27
- Work-life balance as an IT contractor: 5 top tips from a tech recruiter Aug 30 08:20
- Autumn Statement 2023 tipped to prioritise mental health, in a boost for UK workplaces Aug 29 08:33
- Final reminder for contractors to respond to the umbrella consultation (closing today) Aug 29 08:09
- Top 5 most in demand cyber security contract roles Aug 25 08:38
- Changes to the right to request flexible working are incoming, but how will contractors be affected? Aug 24 08:25
Leave a comment: