Reply to: What is the best way to take money out from the company bank account?

[TheFaQQer]

What are the limits?

£40k a year to get tax relief.

When can I withdraw the money out? As soon as I close my company down or do I have to wait till retirement?

When you are 55 - HM Revenue & Customs: Taking your pension before you're 55 using a protected pension age

How can I find out if I am entitled to Entrepreneurs Relief?

http://www.hmrc.gov.uk/helpsheets/hs275.pdf

Who can claim relief?
Entrepreneurs’ Relief is available to individuals and some trustees of settlements, but it is not available to companies or personal representatives of deceased persons or in relation to a trust where the entire trust is a discretionary settlement. Page 6 gives more details of the qualifying conditions for trustees of settlements.

How long can I take the loan out for before interest and tax become due?

Nine months after the year end.

I do live with my partner. Can i transfer dividends and salary to himself as well?

Yes. You can pay him a salary if he is doing work for the company - ensure that the level paid is reasonable for the work that they do, though. You cannot give him dividends unless he is a share holder.

You can give him shares in the company. That would (in all likelihood) amount to a settlement which is taxed because you are not married.

You can sell him shares in the company. That would be a settlement but one which may not require tax to be paid.

Gifting or selling shares between unmarried partners requires careful planning and execution. I know of only one person who has done this - everyone else I know who has considered this has walked away.

Will this affect his tax return? I.e pay more back to HMRC because he has another source of income?

[Clare@InTouch]

Hi all,

"Money saves in the company can be paid into to your personal pension up to certain limits, and then withdrawn at a much lower tax rate when you close provided you're entitled to Entrepreneurs Relief"

What are the limits? When can I withdraw the money out? As soon as I close my company down or do I have to wait till retirement?
How can I find out if I am entitled to Entrepreneurs Relief?


"You could take a director's loan of £10k and repay it before interest and tax become due, and invest that."
How long can I take the loan out for before interest and tax become due?

I do live with my partner. Can i transfer dividends and salary to himself as well? Will this affect his tax return? I.e pay more back to HMRC because he has another source of income?

Thanks!

You cannot give shares, and thus pay dividends, to someone who is not your spouse unless you relinquish all interest in the money. If you live together you retain an interest as you have joint bills etc, so not recommended. You can pay him a salary if he does something for it, but you should be able to justify it. If your other half has other income then it may not be worth it.

You can pay into a pension via the company, up to £40,000 a year. You may be able to use prior year's entitlements if the scheme existed back then. Talk to an IFA - your accountant can recommend one if necessary.

When you cease trading and close a company you can take any final money as a capital gain, in most circumstances. You can close a company at any time, you don't need to wait until you retire. You must be ceasing to trade though - you cannot close the company then open a new one doing the exact same thing. Talk to your accountant on that one.

[kesm]

Hi all,

"Money saves in the company can be paid into to your personal pension up to certain limits, and then withdrawn at a much lower tax rate when you close provided you're entitled to Entrepreneurs Relief"

What are the limits? When can I withdraw the money out? As soon as I close my company down or do I have to wait till retirement?
How can I find out if I am entitled to Entrepreneurs Relief?


"You could take a director's loan of £10k and repay it before interest and tax become due, and invest that."
How long can I take the loan out for before interest and tax become due?

I do live with my partner. Can i transfer dividends and salary to himself as well? Will this affect his tax return? I.e pay more back to HMRC because he has another source of income?

Thanks!

[Clare@InTouch]

Clare, would it be a permanent settlement or would it cease to be a settlement on a subsequent marriage?

Subsequent marriage wouldn't help, as the settlement was made when the spousal exemption wasn't available. All dividends paid would be at risk, regardless of when they paid.

The only way to correct it would be to issue new shares after marriage, of a different class, and only pay out on the new shares. You could close the company, but that in itself highlights you to HMRC and they may then notice the original settlement.

[TheCyclingProgrammer]

Clare, would it be a permanent settlement or would it cease to be a settlement on a subsequent marriage?

Subsequent marriage won't change the original position, whatever that might be. It depends on the circumstances at the point the transfer is made.

You could perhaps argue though that a subsequent marriage would reduce the chances of you investigated but it doesn't change things.

[ASB]

There is no problem at all in gifting shares to your spouse and sharing dividends, provided you are married when the transfer takes place and the shares hold full voting rights (so are not purely a right to income).

If you're not married when you gift the shares or they are non-voting shares, you have a massive problem should HMRC come looking.

Clare, would it be a permanent settlement or would it cease to be a settlement on a subsequent marriage?

[TheCyclingProgrammer]

If not, it's a Settlement.

But lets not forget, just because its a settlement (i.e. bounteous transaction), doesn't automatically make it taxable on the settlor (for the millionth time).

[TheCyclingProgrammer]

kesm has a boyfriend, so not really an option (without lots of careful thought and planning, before TCP comes along)

[Clare@InTouch]

Great, she can have half for a quid!

If you can honestly say that you'd also sell half your company to me for the same value, then go for it.

My £1 is in the post

[stek]

What Clare says is correct, but it is almost impossible to place an accurate market value on the shares of a one person contractor company for so many reasons.

Great, she can have half for a quid!

[Martin at NixonWilliams]

If she bought for market value on genuine commercial terms, on an arms length basis, then yes.

What Clare says is correct, but it is almost impossible to place an accurate market value on the shares of a one person contractor company for so many reasons.

[Clare@InTouch]

Can't his bird just buy a share of the business?

If she bought for market value on genuine commercial terms, on an arms length basis, then yes. But that could be expensive if the company has a long contract in place and therefore guaranteed future income of a certain level or a lot of assets. Plus if she's buying the shares from him he'll have a capital gain to pay tax on as presumably he bought the shares at par (£1 each on incorp).

If not, it's a Settlement.

[ChimpMaster]

It's not unusual though - you're also not on an equal footing when it comes to inheritance tax, the older married persons tax code etc. It's one of the exceptionally daft ways that the Government try to encourage marriage, and penalise anyone that doesn't want to get married.

You could just marry her of course. If you then gave her shares you'd save in tax the amount it costs for an awesome honeymoon. Just don't say "will you marry me for tax reasons darling"

Can't his bird just buy a share of the business?

[TheFaQQer]

Also seems grossly unfair, I've been living with my partner for 13 years as man and wife, longer than I was married previously!

Yet I can't avail of this!

[Clare@InTouch]

Also seems grossly unfair, I've been living with my partner for 13 years as man and wife, longer than I was married previously!

Yet I can't avail of this!

It's not unusual though - you're also not on an equal footing when it comes to inheritance tax, the older married persons tax code etc. It's one of the exceptionally daft ways that the Government try to encourage marriage, and penalise anyone that doesn't want to get married.

You could just marry her of course. If you then gave her shares you'd save in tax the amount it costs for an awesome honeymoon. Just don't say "will you marry me for tax reasons darling"