Maximising interest return from company funds.

[contractor79]

I usually use HSBC* fixed term business deposit bonds for that sort of thing




*other financial institutions are available

I use that currently as well.

[thunderlizard]

I usually use HSBC* fixed term business deposit bonds for that sort of thing




*other financial institutions are available

[Peoplesoft bloke]

I still don`t see why loans wouldn't work. Your second point is about having to pay tax on 3.125 GBP . You presumably mean Individual Tax ? Well individuals pay tax on interest earnings from their normal savings accounts anyway . That we already know. But 3.125 GBP minus 40 % tax leaves you with 1875 GBP. Whereas should the 50K were at a 3.5 % account you will have made 1750 GBP in interest which minus 40 % leaves you with 1050 GBP.

Am I missing something ?

And what do you mean by "official rate" ? Every bank will have its own rate..

Official rate is the rate Hector uses to calculate the value of the benefit - so if yourco didn't charge interest on the loan, Hector says you received a taxable benefit based on the interest you would have had to pay otherwise.

Aside from the fact that it compares two totally unrelated things, your calculation doesn't take into account employers NI.

[Likely]

No, this is wrong.

There are two provisions.

The first is the special Corporation Tax charge levied on all outstanding loans to participants in a company. This is 25% of the loan value, and if the loan has not been paid off by the time you submit your CT return (which is due about 9 months after year end), then the CT is payable by the company.

That is problem one, which you should notice when completing your CT return, because they ask you.

The second issue is the question of benefits in kind for personal taxation. There are two types of loan, qualifying and non-qualifying. Basically most loans are non-qualifying, so don't worry about the qualifying ones. You are allowed a non-qualifying loan of up to £5k without incurring any BIK Income Tax. This £5k is the maximum daily balance; i.e. if you borrow £10k for one day, and pay £9k back the next, and then maintain that £1k for the rest of the year, then BIK taxation becomes applicable, and the reason it becomes due is that you exceeded £5k at any point during the personal taxation law. A constant balance of £5,000 throughout the year would be fine and no income tax is payable.

The loan you have received from your company presumably exceeds £5k. Though it sounds like you are avoiding the nasty CT charge by paying it back, you still have to declare it on your Self Assessment return.

If you borrow £50k from your company for a year, then the official interest rate was 6.25%, hence you are deemed to have earned £3,125, and must pay Income Tax AND National Insurance according to the appropriate rates.

So you shouldn't do it.

Best thing to do with company cash is stick it here:

http://www.northernrock.co.uk/saving...iness-reserve/

I still don`t see why loans wouldn't work. Your second point is about having to pay tax on 3.125 GBP . You presumably mean Individual Tax ? Well individuals pay tax on interest earnings from their normal savings accounts anyway . That we already know. But 3.125 GBP minus 40 % tax leaves you with 1875 GBP. Whereas should the 50K were at a 3.5 % account you will have made 1750 GBP in interest which minus 40 % leaves you with 1050 GBP.

Am I missing something ?

And what do you mean by "official rate" ? Every bank will have its own rate..

[Moscow Mule]

Not if I can help it. Full of hype and media nonsense.

Indeed, it did (after all) cause the NR "scandal".

[luke warm]

Do you watch the news?

Not if I can help it. Full of hype and media nonsense.

You do know that the government own NR now don't you?

Well even more reason to avoid it then...

[Moscow Mule]

yeah that's a really good place to put yer money. Might as well fill in the FSA compensation paperwork now to get the ball rolling.

Do you watch the news? You do know that the government own NR now don't you?

[luke warm]

No, this is wrong.

There are two provisions.

[snip very useful info]

So you shouldn't do it.

Best thing to do with company cash is stick it here:

http://www.northernrock.co.uk/saving...iness-reserve/

yeah that's a really good place to put yer money. Might as well fill in the FSA compensation paperwork now to get the ball rolling.

[ContractIn]

No, this is wrong.

There are two provisions.

The first is the special Corporation Tax charge levied on all outstanding loans to participants in a company. This is 25% of the loan value, and if the loan has not been paid off by the time you submit your CT return (which is due about 9 months after year end), then the CT is payable by the company.

That is problem one, which you should notice when completing your CT return, because they ask you.

The second issue is the question of benefits in kind for personal taxation. There are two types of loan, qualifying and non-qualifying. Basically most loans are non-qualifying, so don't worry about the qualifying ones. You are allowed a non-qualifying loan of up to £5k without incurring any BIK Income Tax. This £5k is the maximum daily balance; i.e. if you borrow £10k for one day, and pay £9k back the next, and then maintain that £1k for the rest of the year, then BIK taxation becomes applicable, and the reason it becomes due is that you exceeded £5k at any point during the personal taxation law. A constant balance of £5,000 throughout the year would be fine and no income tax is payable.

The loan you have received from your company presumably exceeds £5k. Though it sounds like you are avoiding the nasty CT charge by paying it back, you still have to declare it on your Self Assessment return.

If you borrow £50k from your company for a year, then the official interest rate was 6.25%, hence you are deemed to have earned £3,125, and must pay Income Tax AND National Insurance according to the appropriate rates.

So you shouldn't do it.

Best thing to do with company cash is stick it here:

http://www.northernrock.co.uk/saving...iness-reserve/

cheers dude.

Now I know!

[dude69]

I do this. I believe you account for it as a loan to you from the company.

I have been advised that I should pay back the loan up to 3 months prior to my accounts being submitted.

If this is indifferent to what others have been told then not aware of any restrictions?

No, this is wrong.

There are two provisions.

The first is the special Corporation Tax charge levied on all outstanding loans to participants in a company. This is 25% of the loan value, and if the loan has not been paid off by the time you submit your CT return (which is due about 9 months after year end), then the CT is payable by the company.

That is problem one, which you should notice when completing your CT return, because they ask you.

The second issue is the question of benefits in kind for personal taxation. There are two types of loan, qualifying and non-qualifying. Basically most loans are non-qualifying, so don't worry about the qualifying ones. You are allowed a non-qualifying loan of up to £5k without incurring any BIK Income Tax. This £5k is the maximum daily balance; i.e. if you borrow £10k for one day, and pay £9k back the next, and then maintain that £1k for the rest of the year, then BIK taxation becomes applicable, and the reason it becomes due is that you exceeded £5k at any point during the personal taxation law. A constant balance of £5,000 throughout the year would be fine and no income tax is payable.

The loan you have received from your company presumably exceeds £5k. Though it sounds like you are avoiding the nasty CT charge by paying it back, you still have to declare it on your Self Assessment return.

If you borrow £50k from your company for a year, then the official interest rate was 6.25%, hence you are deemed to have earned £3,125, and must pay Income Tax AND National Insurance according to the appropriate rates.

So you shouldn't do it.

Best thing to do with company cash is stick it here:

http://www.northernrock.co.uk/saving...iness-reserve/

[Peoplesoft bloke]

I think you can only make this kind of loan up to 5k without it attracting tax on the benefit. A huge firm I worked at (a Client co) used to place large sums on overnight deposit - but they had a lot of clout. For the smaller outfits we run, options are less - why not try asking on business or accounting?

[ContractIn]

Most business current accounts (CA) with Barclays / HSBS / etc. do not give interest. However CAs will have an associated Savings Account (SA) that will provide mediocre ~ 3.5 interest.

Now, a Limited Company might accumulate hefty sum for Corp Tax , VAT , retained profits. This makes it senseless to look for the maximum interest account possible.

Questions:

1. There are high-interest savings account such as http://www.kaupthingedge.co.uk/ account which pays 6.5 % at the moment with constant access to the account. This account , however can be only opened in the name of an Individual and not in the name of a Limited Company.
My accountant has advised that it is not possible to utilize this high-interest savings account because it need be opened in the name of the Limited Company. Is this true ?

2. Why is it a problem to simply take some money off the a business Current Account and transfer it to another high-interest account. Then when the money is needed , simply move the same amount of money back to the Business CA , without accounting where the money has been. Any interest income derived could be recorded on the individual’s tax Self Return from

3. If both suggested options in 1 and 2 are not realistic then where Limited Companies keep money that is not needed immediately ? My limited company has turnover of less 100K pa and still it is painful to have “tax” money stay in a mediocre 3.5 % Gross Savings Account ( HSBC in my case ). What about limited companies with millions of turnover ? They lose hundred thousands ….. There has got to be some option ….

I do this. I believe you account for it as a loan to you from the company.

I have been advised that I should pay back the loan up to 3 months prior to my accounts being submitted.

If this is indifferent to what others have been told then not aware of any restrictions?

[Likely]

Most business current accounts (CA) with Barclays / HSBS / etc. do not give interest. However CAs will have an associated Savings Account (SA) that will provide mediocre ~ 3.5 interest.

Now, a Limited Company might accumulate hefty sum for Corp Tax , VAT , retained profits. This makes it sensible to look for the maximum interest account possible.

Questions:

1. There are high-interest savings account such as http://www.kaupthingedge.co.uk/ account which pays 6.5 % at the moment with constant access to the account. This account , however can be only opened in the name of an Individual and not in the name of a Limited Company.
My accountant has advised that it is not possible to utilize this high-interest savings account because it need be opened in the name of the Limited Company. Is this true ?

2. Why is it a problem to simply take some money off the a business Current Account and transfer it to another high-interest account. Then when the money is needed , simply move the same amount of money back to the Business CA , without accounting where the money has been. Any interest income derived could be recorded on the individual’s tax Self Return from

3. If both suggested options in 1 and 2 are not realistic then where Limited Companies keep money that is not needed immediately ? My limited company has turnover of less 100K pa and still it is painful to have “tax” money stay in a mediocre 3.5 % Gross Savings Account ( HSBC in my case ). What about limited companies with millions of turnover ? They lose hundred thousands ….. There has got to be some option ….