Interest on Company Funds via an ISA?
Discussion
I work as a contractor through my own limited company.
So in calculating my monthly income I always remove the corporation tax from the company profits before issuing my dividend. The accrued monies for corporation tax then sit in the bank earning diddlysquat waiting for the day I need to pay the corp. tax bill.
If I was to pay said funds in to my ISA as part of my remaining allowance for this year, and then pay the money back in to the company account including any interest paid on that proportion of the ISA's total, would I be in danger of incurring any extra tax liability?
As I see it:
The money goes to the ISA to earn interest (say £1000 goes in)
The £1000 plus the interest from that £1000 goes back in to the company account to pay the corp tax bill
Personally, my ISA has not gained from the money as the money and it's interest has been removed, so I shouldnt be liable for any BIK taxation
The company will have to pay corporation tax on the interest paid on the £1000
Or would it be easier getting a term-deposit with a bank and just gaining whatever I can get off that?
So in calculating my monthly income I always remove the corporation tax from the company profits before issuing my dividend. The accrued monies for corporation tax then sit in the bank earning diddlysquat waiting for the day I need to pay the corp. tax bill.
If I was to pay said funds in to my ISA as part of my remaining allowance for this year, and then pay the money back in to the company account including any interest paid on that proportion of the ISA's total, would I be in danger of incurring any extra tax liability?
As I see it:
The money goes to the ISA to earn interest (say £1000 goes in)
The £1000 plus the interest from that £1000 goes back in to the company account to pay the corp tax bill
Personally, my ISA has not gained from the money as the money and it's interest has been removed, so I shouldnt be liable for any BIK taxation
The company will have to pay corporation tax on the interest paid on the £1000
Or would it be easier getting a term-deposit with a bank and just gaining whatever I can get off that?
The ISA is in your personal name. Therefore, any money drawn from the company to pay into that account counts as money paid to you personally.
Whether you are liable to Income Tax and/or NI on this additional amount withdrawn depends on:
the total amount you draw fromn the company in the tax year
the split of these drawn amounts between salary and dividends
Whether you are liable to Income Tax and/or NI on this additional amount withdrawn depends on:
the total amount you draw fromn the company in the tax year
the split of these drawn amounts between salary and dividends
Eric Mc said:
The ISA is in your personal name. Therefore, any money drawn from the company to pay into that account counts as money paid to you personally.
Whether you are liable to Income Tax and/or NI on this additional amount withdrawn depends on:
the total amount you draw fromn the company in the tax year
the split of these drawn amounts between salary and dividends
But what if you put the money back in the company account? As if you're giving yourself an interest free loan?Whether you are liable to Income Tax and/or NI on this additional amount withdrawn depends on:
the total amount you draw fromn the company in the tax year
the split of these drawn amounts between salary and dividends
I wondered the same thing myself recently, as I'm the only person who ever sees my company bank statements, whats to stop me shoving the money in an interest bearing account as long as I wire it back and all the figures add up at the end of the year? (I'm not saying i *can* get away with this, I'd just like to know how HMRC would look upon such activities)
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