Reply to: Coproration Tax To Rise to 25%

[AtW]

Come to think of it - Tory Scum robbed Pension Funds with that corp tax increase, very nice in the environment of fook all interest needed to pay pensioners.

[AtW]

But cash reserves were never disallowed - unless I'm misunderstanding.

I believe any (serious) cash left in the company has to be treated as dividend-able tax wise rather than capital gains (ER) - certainly on a sale of the company, maybe they still allowed that for liquidation.

[ChimpMaster]

AFAIK few years ago HMRC disallowed cash reserves being claimed as ER, and now ER is lower and might be nuked completely this autumn. The deal is getting worse all the time...

It is getting worse for sure.

But cash reserves were never disallowed - unless I'm misunderstanding. It was often discussed, especially around the 2016 budget when the 2 year anti-phoenix rule was brought in. But it wasn't acted on any further than to stop people repeating the liquidation/ER procedure every few years.

[d000hg]

Hardly. How many of those you've listed are going to be incorporated?

Loads of them. If you have employees, you virtually have to be.

[AtW]

AFAIK few years ago HMRC disallowed cash reserves being claimed as ER, and now ER is lower and might be nuked completely this autumn. The deal is getting worse all the time...

[ChimpMaster]

Why are contractors not doing this already? Money left in the company bank account is earning diddly squat interest, much better to put it into a pension - you will get a better return, and you save corp tax.

I never put money into a pension during my contracting years. I just didn't want to have to wait 20 years to get my hands on the funds, because I prefer to have control over it myself and invest it sooner. In my mind it was better to wait until my retirement from contracting and then liquidate and claim ER. Then I would have the funds earlier and could invest them wherever and whenever I wanted.

Fortunately "Moneyboxing", though on HMRC's radar, was never outlawed or taxed out of existence.

However, I do think it's generally a good idea to make use of pension allowances and in hindsight it would have been good for me to chuck in £40k a year into a pension. Would have made a nice side investment with another income stream.

[Andy2]

if you want to pay less tax
work only 8-9 months a year

[Whorty]

I predict some large pension payments will be made from 2023 onwards to offset profits to keep the corp tax liability to the minimum.

Why are contractors not doing this already? Money left in the company bank account is earning diddly squat interest, much better to put it into a pension - you will get a better return, and you save corp tax.

[AtW]

I predict some large pension payments will be made from 2023 onwards

Not after that Autumn's Budget of DOOM...

[MPwannadecentincome]

Well, in this case this is profits, which would be after PAYE costs and pension, but yes you could be right on the what people perceive as being well off.

I predict some large pension payments will be made from 2023 onwards to offset profits to keep the corp tax liability to the minimum.

[AtW]

somebody somewhere in the civil service has a 50K magic number somewhere?

Most likely a focus group confirmed amount that most people think is the "rich mark", plus 40% tax kicks in there, HMG does not want to help people who can afford to pay so much tax in the first place.

[MPwannadecentincome]

When the Govt announced self employed Coronavirus support it was restricted to profits of upto £50K per annum. Strange the number is the same even though the business model is different, self employed don't pay Corp Tax... somebody somewhere in the civil service has a 50K magic number somewhere?

[ladymuck]

Hardly. How many of those you've listed are going to be incorporated?

My local hairdresser salon owner is incorporated. The stylists themselves may not be - not sure if they're working on a 'rent a chair' basis or employed.

[SueEllen]

Hardly. How many of those you've listed are going to be incorporated?

There are people in entertainment who work behind the scenes in lighting, camera operation, sound, costumes, etc who are incorporated. They easily make under 50K.

There are also tradesmen who are incorporated. Some of them will make under 50K profit.

[Great Parks]

A small hair salon? A sandwich shop or pub? Someone running a B&B?
Really not hard when you look outside your own bubble. Many businesses make very little profit especially if they pay salaries rather than just use dividends.
For that matter, many contractors have profits under £50k once salary and pension and everything is worked out.

Hardly. How many of those you've listed are going to be incorporated?