Reply to: Leaving warchest in company

[TheCyclingProgrammer]

And don't forget that if you go over £50K you'll lose your child benefit...

Particularly annoying if you normally don't pay higher rate tax, but for one year you do (e.g. one off big dividend). You don't have to deregister though, you can just pay it back through your self-assessment.

[mudskipper]

And don't forget that if you go over £50K you'll lose your child benefit...

[d000hg]

Nope, company pension contributions, especially with the budget changes and if you're closer to retirement than leaving school is an attractive option.

That's a whole different topic, obviously the company can spend the money but I didn't want to confuse things. Pensions are different, you should NOT be putting your warchest in one!

[psychocandy]

You're contradicting yourself. If you only take dividends up to the upper tax threshold limit and you have £100k, you HAVE to leave the bulk of it in the company.

True.

[northernladuk]

Noted, so if I make sure I pay it back within the 9 month timeframe, just use it as a one off 9 month buffer (i.e. no bed and breakfasting) I should be ok?

I think you have the rules wrong. It's 9 months from year end. So if you take it at the beginning of a financial year you could get 12+9 months.

EDIT : Crap. Already been explained. Sorry

[kal]

I'm not sure that's what he was suggesting.

Nothing wrong with the plan as long as you time it correctly and pay it back within 9 months of your company year end.

If the loan is under £15k you can avoid bed and breakfasting provisions by waiting 30 days before taking another loan.

Aah right thanks, good to know.

[TheCyclingProgrammer]

Noted, so if I make sure I pay it back within the 9 month timeframe, just use it as a one off 9 month buffer (i.e. no bed and breakfasting) I should be ok?

If you take the loan at the beginning of your company year then you've got up to 21 months to pay the loan back before incurring the CT charge. Hence why timing it right is important.

[TheCyclingProgrammer]

Yup, taking out the loan, repaying to avoid the 25% tax and then re-issuing is termed "bed and breakfasting" and isn't allowed.

See here

http://www.hmrc.gov.uk/budget2013/cl...s-loophole.pdf

I'm not sure that's what he was suggesting.

Nothing wrong with the plan as long as you time it correctly and pay it back within 9 months of your company year end.

If the loan is under £15k you can avoid bed and breakfasting provisions by waiting 30 days before taking another loan.

[kal]

Make sure the loan doesn't exceed the HMRC limit on when to pay interest or not. Make sure you don't fall foul of the bed and breakfasting rules.

Noted, so if I make sure I pay it back within the 9 month timeframe, just use it as a one off 9 month buffer (i.e. no bed and breakfasting) I should be ok?

[Smartie]

You're contradicting yourself. If you only take dividends up to the upper tax threshold limit and you have £100k, you HAVE to leave the bulk of it in the company.

Nope, company pension contributions, especially with the budget changes and if you're closer to retirement than leaving school is an attractive option.

[TheFaQQer]

Exactly, that's what I am doing currently, draw up to 40% and keep the rest there, from next year I want to be offsetting my mortgage as much as possible so a directors loan may be an option I guess?

Anyone see any problems with taking a 10k directors loan and using it to offset the mortgage for 9 months and then paying it back?

Make sure the loan doesn't exceed the HMRC limit on when to pay interest or not. Make sure you don't fall foul of the bed and breakfasting rules.

[kal]

Yup, taking out the loan, repaying to avoid the 25% tax and then re-issuing is termed "bed and breakfasting" and isn't allowed.

See here

http://www.hmrc.gov.uk/budget2013/cl...s-loophole.pdf

I wasn't planning on re-issuing it, just using it to give me a one off 9 months worth of 10k off my mortgage, agree that 'bed and breakfasting' would be a no-no!

[Maslins]

...so you're planning on earning nothing for 9 years after a year's work to avoid tax?

Why not save a further £20k in CT in year 1 by not working that year either?

Bit confused...deliberately not earning may mean you pay less tax, but tax is only every a % of what you earn, so your plan sounds very much like cutting off your nose to spite your face.

Normally (very witty) accountants reply with "why don't you pay us twice as much to do our work, then you'll save even more tax".

[Pondlife]

Anyone see any problems with taking a 10k directors loan and using it to offset the mortgage for 9 months and then paying it back?

Yup, taking out the loan, repaying to avoid the 25% tax and then re-issuing is termed "bed and breakfasting" and isn't allowed.

See here

http://www.hmrc.gov.uk/budget2013/cl...s-loophole.pdf

[d000hg]

I take everything I can out of my profits up to 40% limit, based on salary to me and divis to my wife and I.
I've been squirreling as much as I can away from this in liquid places like a Santander 123 account for the interest and then ISAs.
Initially, this was my warchest.

If you are on a decent rate, taking money out to the 40% limit leaves a lot left over.

Conversely if you are the sole earner in your household, "only" taking personal income up to that threshold isn't going to leave much to max out ISAs, savings, etc... so if you are on £500/day you can struggle with being rich and poor at the same time, as it were!