Cash 'Rich' SME - Where to Stash It?

[Purple]

Brendan

You may be missing the point that the company will gain a Corporation Tax deduction for salaries when/if salary extraction takes place in the future. So the 'tax inefficiency' argument against retaining funds in the company is weak enough. Incurring a tax cost of 50%+ on extracted salaries is hardly tax efficient either.

Otherwise, I can only repeat my earlier point that blowing windfall profits on salary extraction may prove a false economy if the company needs a reinjection of those funds at a later stage. By then, half of the entire pot will be gone in tax.

That's my view as well.

 

[Brendan Burgess]

We discussed all this some years ago in this Key Post

Take salary or leave profits in the company?

While the tax rates have changed, I think that the principles and the strategy remains the same.

I will revisit the Key Post at some stage and do up a few examples to illustrate the points I am making.

In general - if you look at it from the company's point of view, you leave as much money in the company. But I only ever see a company as an extension fo the individual and cash is only cash when it's in my pocket. Cash in a company is not my cash.

Brendan