Discussion
last year i took a job as a contractor which lasted for just over 14 months. created a ltd company and all ok.
When the contract came to an end, i found that it better suited me to go back to being a permy.
This has left a bit of money left in the ltd company. Can i continue to draw dividends from the company, even tho there is no income at the moment ? To put it another way, what options do i have to get at the money ? i'm aware it can go towards pension but It's burning a hole and in true PH fashion, there is a lovely little Triumph GT6 on ebay ....
When the contract came to an end, i found that it better suited me to go back to being a permy.
This has left a bit of money left in the ltd company. Can i continue to draw dividends from the company, even tho there is no income at the moment ? To put it another way, what options do i have to get at the money ? i'm aware it can go towards pension but It's burning a hole and in true PH fashion, there is a lovely little Triumph GT6 on ebay ....
You may be able to liquidate the company and claim entrepreneurs relief if you want to get all the cash out, which is more tax efficient than drawing money out of the company in the usual fashion.
An accountant would be able to give you the pros and cons of this, it's fairly complex like most things to do with tax.
An accountant would be able to give you the pros and cons of this, it's fairly complex like most things to do with tax.
Speak to your accountant.
Last information I had (5 years ago), you can apply to shut down the company and remove company funds. This allows you to pay only 10% on funds upto £25k (This is called entrepreneurs relief). You will still have to declare the money on our personnel tax return. This is the best way to take money out of a company if you have no intention of returning to contracting any time soon.
Last information I had (5 years ago), you can apply to shut down the company and remove company funds. This allows you to pay only 10% on funds upto £25k (This is called entrepreneurs relief). You will still have to declare the money on our personnel tax return. This is the best way to take money out of a company if you have no intention of returning to contracting any time soon.
To be eligible for Entrepreneur's Relief, you need to have been running and managing the trading activity for AT LEAST two years.
If you only ran the company for 14 months you will not qualify.
HOWEVER, if you keep the company alive a bit longer and in that time endeavour to get some trading activity through it for (say) another 12 months, you might be able to do enough to enable ER to be claimed.
If you only ran the company for 14 months you will not qualify.
HOWEVER, if you keep the company alive a bit longer and in that time endeavour to get some trading activity through it for (say) another 12 months, you might be able to do enough to enable ER to be claimed.
How much money is it your talking about?
-- A more general thought I have had in the past is, I know a few contractors with money kicking around like this and without the will to see investigate and chase the best way to exit the company. I have wondered if there is a gap for some company to hoover up all these small pots for more than the individual directors could exit for after tax, (so the buying company could take the money at leisure and reap pretty good rewards) is this viable? Is this a thing? -- Or is due diligence so expensive it's not worth the while for small pots of say £40-£100k in general?
Filling your pension or others directors pensions should be tax efficient way to remove some money.
Could you overpay your perm pension and then use the ltd co dividends to live from?
Or vice versa, put money into a pension from ltd co? If your near the age you can take it may be worthwhile.
-- A more general thought I have had in the past is, I know a few contractors with money kicking around like this and without the will to see investigate and chase the best way to exit the company. I have wondered if there is a gap for some company to hoover up all these small pots for more than the individual directors could exit for after tax, (so the buying company could take the money at leisure and reap pretty good rewards) is this viable? Is this a thing? -- Or is due diligence so expensive it's not worth the while for small pots of say £40-£100k in general?
Filling your pension or others directors pensions should be tax efficient way to remove some money.
Could you overpay your perm pension and then use the ltd co dividends to live from?
Or vice versa, put money into a pension from ltd co? If your near the age you can take it may be worthwhile.
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