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?
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.
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
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.
NickCQ said:
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).
Can't do anything more with pensions for anyone in the family. Never heard of PECs. Will try and educate myself. avinalarf said:
I decided a few years ago to contribute to buying a flat for each of my three daughters.
Not only to lessen the impact of IHT ,but more importantly ,to me,to have the enjoyment and peace of mind of seeing them "settled" whilst I was still alive.
I add that all three have always been industrious after leaving Uni,don't want you to think they are shirkers..
Other than that invested in my business,shares,pension and cash,nothing too exotic.
Yup. Mine have a crappy Zone 4 flat each. 5 mins from tube. ISAs and pensions done each year. Not only to lessen the impact of IHT ,but more importantly ,to me,to have the enjoyment and peace of mind of seeing them "settled" whilst I was still alive.
I add that all three have always been industrious after leaving Uni,don't want you to think they are shirkers..
Other than that invested in my business,shares,pension and cash,nothing too exotic.
NickCQ said:
DonkeyApple said:
Yes. I absolutely refuse to pay any more higher rate tax.
How tied to the UK are you? Have you considered Guernsey or any of the other usual suspects?avinalarf said:
BTW ,whilst we are rightly concerning ourselves with maximising the return and keeping a hold on our hard earned savings.
Apparently 16 million of our fellow Britons have less than £100 in savings.
What's that all about ?
Can that really be true ?
Very sad ,and no good for any of us,let alone them.
Unfortunately what's important is out of that 16m hoe many are genuine and how many are self imposed paupers due to haemorrhaging cash living the dream. I walk around the Coty these days and all the younger blokes are living like girls. Shopping in Boots, drinking cocktails, eating in restaurants and generally prancing about like vagazzled ponces too busy living the dream to realise the only people who can live like that are the ones who know how to and are willing to work a rich man's chap. Apparently 16 million of our fellow Britons have less than £100 in savings.
What's that all about ?
Can that really be true ?
Very sad ,and no good for any of us,let alone them.
Ozzie Osmond said:
DonkeyApple said:
Yup. Mine have a crappy Zone 4 flat each. 5 mins from tube. ISAs and pensions done each year.
So why on earth are you fretting about IHT? I think you're crazy. And no, I wouldn't move out to a tax haven just to save tax either. Pay the tax and enjoy some more spending, or give it to the kids now, anything's better than just looking at it.
I suspect Zenos are still crowd-funding their new E11 model - so there you go! You're more likely to see a new Zenos than a new TVR... 
Ozzie Osmond said:
DonkeyApple said:
It's not that I'm fretting about it it's more that it strikes me as more logical that they have any money rather than the State. And if I take the cash out then half of it goes in tax and I'm still left with needing to convert it away from cash.
What are the kids going to do with this company anyway? Do they have any genuine real-world interest in it?The last bloke I saw in your sort of situation wouldn't sell his shares for tax reasons so exported himself to the Channel Islands to save tax. Then woke up one morning to find the value of his shareholding had dropped nearly 50%. Fact is he'd have been better off to sell his shares, pay the tax and diversify.
Or set yourself up "the DA Charitable Foundation". Avoid the tax and do something useful.
The company would just be an investment vehicle by then. I don't really see my industry being viable or what it is now in ten years time and if certainly rather be doing something else by then. Being a lazy, old estate agent in the countryside strikes me as a mellow way to pass the time.
I've always fancied a proper excuse to buy some red corduroys. My father was a Name, a lucky one in contrast to many of our family friends, some of whom killed themselves as a result of what was done. . It's not a party I would ever contemplate having lived through that mess and appreciating that there is almost nothing in place to prevent such a fiasco from re-occurring.
Ozzie Osmond said:
DonkeyApple said:
My father was a Name, a lucky one in contrast to many of our family friends, some of whom killed themselves as a result of what was done. It's not a party I would ever contemplate having lived through that mess and appreciating that there is almost nothing in place to prevent such a fiasco from re-occurring.
Many layers of insurers carefully packaging up and parcelling out risk but sooner or later someone had to be the back-stop with assets declared and unlimited liability. Big profits year after year for taking that risk and everyone was getting fat. Easy money innit? [Or at least, "Excellent returns every year, old boy, from my wonderful little syndicate!"] What could possibly go wrong?
The advent of the mini Name was the writing on the wall as to many that was a warning that they were needing to rope in more externals. But there came a point when even failing the £2m liquid assets requirement wouldn't get you kicked out as they knew they needed people to stay in.
By the 80s it was a fiasco that people weren't allowed to leave and was being peddled with the most outrageous lies. The greedy even put their wives in so when it turned they were finished.
But it was just the first of the modern City institutions to fall foul of greed and negligent regulation. There have been quite a few since.
Behemoth said:
Wasn't it litigation concerning asbestosis that collapsed the Lloyds house of cards rather than any repeated repackaging of risk? maybe I'm confusing different events..
There were lots of lawsuits. Some were frivolous and brought by people who'd just been greedy and underwritten more syndicates than they could cover while other suits were related to open frauds like Gooda Walker. Many syndicates were just writing as much business as possible at total disregard for risk and farming that risk out to externals. In many ways it was a predecessor to the mortgage fraud scandals of this century. cashmax said:
Why can't you make provision within the shareholding of the Ltd co for EP Relief?
Can you elaborate?At the end of the day, I'm happy keeping the funds in the Ltd but wondering what other options there are other than converting the cash into equities and just running that side as a long term investment portfolio.
Ah, yes. It's not a quandary over how to remove the cash though. It's about what the safest way is to leave it there. For example, the thought was triggered by the current DB situation and how to be protected from a bank bail-in. My initial thought was to do what I know best which is to just convert the cash to an equity portfolio but most people in this forum probably have a far better understanding of Ltd companies than I do so I wanted to see if there were other obvious options that I was unaware of.
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