Discussion
When the banking crisis hit in 2008 I was working for a company and any cash I had was held in my name and was confident in how to move cash into assets to reduce the risk of bank default (a mildly interesting tale was that the week the crisis really kicked off I was on holiday and on Branson's island when he walked up to the dinner table and told us RBS had folded. A few of us were Coutts clients at the time and it's the fastest I've ever sobered up in my life!).
Today, I run my own company and find myself pondering what the best course of action would be should a similar event occur again. I.e how to best plan for an avoid bail-in risk. It's pretty time consuming setting up broking or bullion accounts to enable stock holdings but as a medium/longer term plan it might be a sensible thing to put in place. In an emergency, I guess you could loan the cash out of the company and deal with the fallout later.
But generally speaking there must be other solutions to consider to rapidly convert cash if the need arose?
Today, I run my own company and find myself pondering what the best course of action would be should a similar event occur again. I.e how to best plan for an avoid bail-in risk. It's pretty time consuming setting up broking or bullion accounts to enable stock holdings but as a medium/longer term plan it might be a sensible thing to put in place. In an emergency, I guess you could loan the cash out of the company and deal with the fallout later.
But generally speaking there must be other solutions to consider to rapidly convert cash if the need arose?
There is nowhere to hide, and there's certainly no Emergency Exit. All you can do is choose carefully what you own. For instance, you might think it a good idea to buy a private island. However, the concept of "ownership" means very little if someone turns up with an AK47 and suggests that you leave.
All the danger signs are in place,
All the danger signs are in place,
- The banks think "Your Money" is worth nothing.
- The banks think "Their Money" is worth a great deal.
NickCQ said:
How much cash do you need in the company? If you're really worried about it why not use working capital lines / RCF / factoring / overdrafts / whatever and dividend out all surplus? I can't believe you'd pay much interest on any of that at the moment.
Tax. I'd lose half of it. It's partly me being stubborn but I've paid enormous amounts in income tax over the last 20 years and I currently desire to not pay the higher rates. Ozzie Osmond said:
There is nowhere to hide, and there's certainly no Emergency Exit. All you can do is choose carefully what you own. For instance, you might think it a good idea to buy a private island. However, the concept of "ownership" means very little if someone turns up with an AK47 and suggests that you leave.
All the danger signs are in place,
Yup. Switching cash to physical assets is the core option. Obviously very many of these assets seem over inflated already and the downside risk is arguably quite grim and I've kind of already got the things that I wanted, which tends to swing you back towards gold (which I hate). Or swapping the cash into a basket of blue chips which I'm far more comfortable with the idea of. All the danger signs are in place,
- The banks think "Your Money" is worth nothing.
- The banks think "Their Money" is worth a great deal.
Having always been employed I'm just not as savvy in this side as I should be, I reckon.
DonkeyApple said:
Tax. I'd lose half of it. It's partly me being stubborn but I've paid enormous amounts in income tax over the last 20 years and I currently desire to not pay the higher rates.
Share the frustration but unless you can get creative with PECs or shareholder loans I suppose you are just saving the time value, as Ozzie says. Unless there's something to be done with pension contributions (you may well be at your contribution limit already though).DonkeyApple said:
Or swapping the cash into a basket of blue chips which I'm far more comfortable with the idea of.
That has traditionally been my view and I've run at almost 100% equities for years. However, right now I'm moving some out into cash.With an asset bubble (as you mentioned), no return on cash and bonds looking pricey it looks as though good quality equities have become the default investment. If everyone's piling in to something it's often appropriate to be a bit cautious. However, in the modern world where everything is connected to everything there else there really is nowhere to hide. Some people buy gold but I'm not convinced that's the answer.
Ozzie Osmond said:
No point of sitting on a big pile of cash you can't access just to postpone tax. Not least because future rates may be higher...
There are only two certainties, death and taxes. The secret is to get them in the right order! D
However, if it remains in the company it is IHT free under the current set up and I can just keep drawing a salary until I keel over rather than paying away 50% now and then losing another 40% when I snuff it. Hence the thinking of what to convert it to within the wrapper other than something like an equity portfolio which is my current thinking. There are only two certainties, death and taxes. The secret is to get them in the right order! D
DonkeyApple said:
However, if it remains in the company it is IHT free under the current set up and I can just keep drawing a salary until I keel over rather than paying away 50% now and then losing another 40% when I snuff it. Hence the thinking of what to convert it to within the wrapper other than something like an equity portfolio which is my current thinking.
Maybe I'm being thick but don't you pay tax on the salary component? Or are you keeping it under the £150k higher rate limit?DonkeyApple said:
However, if it remains in the company it is IHT free under the current set up
Understood. You could pull money out and buy a farm - currently exempt from IHT. https://www.taxation.co.uk/Articles/2015/03/24/332...However, my personal view is that unless you're pretty ancient IHT is a bad tax to worry about. It's just too easy for a new government to come in and change all the rates and/or the rules.
IMO the next round of tax increases will be on "people who own stuff". i.e. Capital Taxes of one form or another.
jshell said:
DonkeyApple said:
Yup. Switching cash to physical assets is the core option.
But, are we getting close to a point where turning them back to cash is a sensible option? Look at the classic car bubble, declining watch auctions, personal debt, etc.Ozzie Osmond said:
jshell said:
but then again, I'm often wrong... 
You're not alone! I sold Energy two days before this week's OPEC announcement, thus missing out on the significant price.Remember: He who makes no mistakes, makes nothing.
DonkeyApple said:
jshell said:
DonkeyApple said:
Yup. Switching cash to physical assets is the core option.
But, are we getting close to a point where turning them back to cash is a sensible option? Look at the classic car bubble, declining watch auctions, personal debt, etc.Ozzie Osmond said:
DonkeyApple said:
However, if it remains in the company it is IHT free under the current set up
Understood. You could pull money out and buy a farm - currently exempt from IHT. https://www.taxation.co.uk/Articles/2015/03/24/332...However, my personal view is that unless you're pretty ancient IHT is a bad tax to worry about. It's just too easy for a new government to come in and change all the rates and/or the rules.
IMO the next round of tax increases will be on "people who own stuff". i.e. Capital Taxes of one form or another.
I probably focus more on IHT due to having two daughters and recognising that if they follow a conventional path they will not earn anywhere near what sons would.
A tax on assets has to be a viable concern down the line. The rampant asset inflation has created far too big a wealth divide and too many CGT free areas have been turned into assets where it is going to be pretty hard to argue they shouldn't be taxed.
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