Spending Company Profits

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bonanza

Registered User
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I have a simple question;

If my company makes a profit, surely I can spend that profit on anything I want ? So lets say I want to buy a boat - I could buy that with company profits ?

Isnt that better than paying me a larger salary so that I can buy the boat myself ?The benefit is because PAYE is 42% while Company tax is only 12%.

Am I correct in this thinking ?
And if I am can I then get my company profits to buy my groceries, pay for my drycleaning, my holidays etc ?

Please let me know if this is allowable ?
 
No you are incorrect. You are the company are two seperate entities. If you want to extract funds from the company you need to pay yourself a salary. You cannot extract funds from the company for personal items, if you do you should be putting all payments through as salary.
 
Are you in the business of providing:
boat resales, pleasure cruises, deep sea angling excursions? If the answer to any of these is no, then your boat will be classed as a directors loan on which tax is payable as normal on balances owed by the director to the company at year end.
 
Well, thanks for bursting the bubble....
I thought at the very least I could get the boat, for company outings, teambuilding, client entertainment......

The groceries, sure that was a longshot.
But the boat...... :(
 
If you are running your own company without a full understanding of what is or is not allowable, then you should get proper professional advice on all the ins and outs.
 
Ubiquitous,
I agree, but finding this mystical person who knows all has proven a difficult quest - If you know of the person who has all the answers then please share his name.
 
bonanza said:
Ubiquitous,
I agree, but finding this mystical person who knows all has proven a difficult quest - If you know of the person who has all the answers then please share his name.
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I know of a special book that contains details of such mystical persons. Look in the Golden pages under accountants and all will be revealed!
 
If your company has cash to spare the one thing that you are allowed to buy on your own behalf is a pension. Maybe it would make more sense than a boat but would not be as much fun.
 
Thank you all for your responses -
I have an accountant who is very helpfull but has admitted to not knowing everything, my Financial advisor and accountant often dont agree on certain things.

Mind you they certainly would not like the fact that I am checking up on them via a website.....

Pension ....
How about a boat named pension ;)
 
bonanza said:
I have an accountant who is very helpfull but has admitted to not knowing everything,
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I would be more worried if the opposite was the case.

bonanza said:
my Financial advisor and accountant often dont agree on certain things.
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Ditto.
 
I would look for a new accountant, if he cant answer the basic questions you asked here!
 
I agree.

I'm a qualified accountant but someone who uses the title "accountant" and cannot tell you the most basic of information should not advertise to be an accountant.

Reduce your profits during the year by paying yourself additional salary (taxed at 47% on it however), contributing to a pension (very tax efficient).

Alternatively at the end of the year when you see what profits are like, extract profits by paying yourself a dividend. Again though, there'll be the 47% tax hit on dividends received.

You and the company are totally separate entities - that's one of the advantages of having a company as you (personally) have limited liability if things go belly up. Which will probably happen if you continue receiving advice from your "accountant".

Good luck with the boat!
 
Kilkenny Tax said:
that's one of the advantages of having a company as you (personally) have limited liability if things go belly up.
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This isn't true any longer in most cases as directors can now fairly readily be made liable for the debts of an insolvent company where such debts or insolvency can be attributed to "negligence", ie mistakes, on the part of the directors. I think any of the cunning plans mentioned above might well qualify as "negligence" in this context.
 
This isn't true any longer in most cases as directors can now fairly readily be made liable for the debts of an insolvent company where such debts or insolvency can be attributed to "negligence", ie mistakes, on the part of the directors.
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Is this commonplace? I would have thought that mistakes would not have been punishable in this way, surely that defeats the purpose of the whole company vehicle structure. Reckless trading is one thing, but is this not a whole new ball game. Surely the creditors have to shoulder some of the risk of doing business too - for example banks advance monies based on their professional assessment of business plans etc, other companies trade with firms who eventually go to the wall, is the profit they make on trading not the investment they make in the company. Should they not assure themselves as to the status of a company they're doing business with? (obviously not a complete analytical review every time they trade with a client, but they'll have some idea in most cases). Were the former USIT brought up on reckless trading charges - if so how did that end up?
 
Kilkenny Tax said:
I'm a qualified accountant but someone who uses the title "accountant" and cannot tell you the most basic of information should not advertise to be an accountant.
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Not true-I am a qualified accountant working in industry and am perfectly entitled to call myself an accountant, without having the level of expertise to advise on the situation being discussed here. Horses for courses etc.
 
If you weren't able to tell a person that "Profits after tax aren't just yours for spending" then I don't think you should call yourself an accountant.

It's not a case of horses for courses at all. I don't know the first thing about building so i can't call myself a builder. I can't cook so I'm not a chef. However, you are an accountant and although you don't specialise in this area you should be able to tell someone basic basic information.
 
I agree, i am also an accountant and am amazed that an "accountant" could not tell yo uthe basic information. To qualify as an accountant one has to do continous training to keep informed on various updates, etc. Every single proper accountant should be able to answer the original question off the top of his head.
 
Kilkenny Tax said:
If you weren't able to tell a person that "Profits after tax aren't just yours for spending" then I don't think you should call yourself an accountant.

It's not a case of horses for courses at all. I don't know the first thing about building so i can't call myself a builder. I can't cook so I'm not a chef. However, you are an accountant and although you don't specialise in this area you should be able to tell someone basic basic information.
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The ICAI has admitted me as a member, based on the attainment of the necessary exams and submission of a satisfactory Record of Experience, and I retain my membership by completing the necessary recoginsed CPD courses, therefore, I am an accountant. Your opinion, and Niall M's, are pretty much meaningless-there are many different types of accountant.

To make it clear-the answer to the original question is fairly straightforward, i.e. no. But extracting profits in a tax efficient manner from a company (especially a close company) is far from simple-that's the wider issue in this thread.
 
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