Hypothetical Tax question?
Discussion
One for Eric probably, but here's my (hypothetical) proposal:
1) Person pays themself minimal salary - saving cash in company.
2) Person moves to, say, Monaco and rents a place.
3) Person pays himself lump sum from monies saved, plus a regular salary for one (or more) year.
4) After one (or more year) person borrows next year's salary from a bank.
5) Person has now received 3 years salary in 1 year - Tax free.
6) Person pays back loan at, circa, 5%.
I can't believe the above idea would work (too simple) so where would person be stung by Her Majesty's Inland Revenue?
1) Person pays themself minimal salary - saving cash in company.
2) Person moves to, say, Monaco and rents a place.
3) Person pays himself lump sum from monies saved, plus a regular salary for one (or more) year.
4) After one (or more year) person borrows next year's salary from a bank.
5) Person has now received 3 years salary in 1 year - Tax free.
6) Person pays back loan at, circa, 5%.
I can't believe the above idea would work (too simple) so where would person be stung by Her Majesty's Inland Revenue?
srebbe64 said:
One for Eric probably, but here's my (hypothetical) proposal:
1) Person pays themself minimal salary - saving cash in company.
2) Person moves to, say, Monaco and rents a place.
3) Person pays himself lump sum from monies saved, plus a regular salary for one (or more) year.
4) After one (or more year) person borrows next year's salary from a bank.
5) Person has now received 3 years salary in 1 year - Tax free.
6) Person pays back loan at, circa, 5%.
I can't believe the above idea would work (too simple) so where would person be stung by Her Majesty's Inland Revenue?
1) Person pays themself minimal salary - saving cash in company.
2) Person moves to, say, Monaco and rents a place.
3) Person pays himself lump sum from monies saved, plus a regular salary for one (or more) year.
4) After one (or more year) person borrows next year's salary from a bank.
5) Person has now received 3 years salary in 1 year - Tax free.
6) Person pays back loan at, circa, 5%.
I can't believe the above idea would work (too simple) so where would person be stung by Her Majesty's Inland Revenue?
At 3 you will be taxed depending on how you pay yourself (ie bonus or dividend) so no gain on a normal situation. 4 & 6 I don't really understand - you are just borrowing money that you personally pay back. If you mean the company pays the bank loan then this is the taxed point so again no real gain.
Alan
Not sure where you have got all these ideas from -
1st of all, what do you mean by mninimal salary? (below the tax and NI thresholds?)
2nd - moving to Monaco - as a permanent resident? Is it that simple?
3rd - borrow from bank - esentially you postpone drawing money from your own company and try to live off money given to you by a bank. How would you be able to meet the repayments and interest on the loan (since you don't have any personal income to enable you to repay the borrowings). What bank would loan you money in thse circumstances.
If and when you did draw money from your company to a) continue to live and b) repay the loan, would not the normal tax and NI amounts kick in at this point.
Obviously, if you were no longer a UK tax resident, you might escape UK tax on your personal income from the company so all these shenanigans might not be necessary.
1st of all, what do you mean by mninimal salary? (below the tax and NI thresholds?)
2nd - moving to Monaco - as a permanent resident? Is it that simple?
3rd - borrow from bank - esentially you postpone drawing money from your own company and try to live off money given to you by a bank. How would you be able to meet the repayments and interest on the loan (since you don't have any personal income to enable you to repay the borrowings). What bank would loan you money in thse circumstances.
If and when you did draw money from your company to a) continue to live and b) repay the loan, would not the normal tax and NI amounts kick in at this point.
Obviously, if you were no longer a UK tax resident, you might escape UK tax on your personal income from the company so all these shenanigans might not be necessary.
Edited by Eric Mc on Saturday 1st July 13:28
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