# Spending Company Profits



## bonanza (17 May 2006)

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 ?


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## Niall M (17 May 2006)

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.


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## Glenbhoy (17 May 2006)

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.


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## Lauren (17 May 2006)

Bonanza...you can but dream! Ohhh the possibilities!


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## bonanza (17 May 2006)

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......


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## ubiquitous (17 May 2006)

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.


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## bonanza (17 May 2006)

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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## Icarus (17 May 2006)

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.



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!


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## Resident (17 May 2006)

Bonanza, 

you might be interested in this from a while back:
not quite the route you wanted, ie company not buying it you are, but might be worth your while taking the extra salary when you include the allowance.
http://www.unison.ie/business/personalfinance/stories.php?ca=257&si=1501697

do of course consult your accountant/tax advisor first, but it does seem feasible...


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## woods (17 May 2006)

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.


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## bonanza (18 May 2006)

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


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## ubiquitous (18 May 2006)

bonanza said:
			
		

> I have an accountant who is very helpfull but has admitted to not knowing everything,



I would be more worried if the opposite was the case.



			
				bonanza said:
			
		

> my Financial advisor and accountant often dont agree on certain things.


 
Ditto.


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## Niall M (18 May 2006)

I would look for a new accountant, if he cant answer the basic questions you asked here!


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## Kilkenny Tax (18 May 2006)

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!


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## ubiquitous (18 May 2006)

Kilkenny Tax said:
			
		

> that's one of the advantages of having a company as you (personally) have limited liability if things go belly up.



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.


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## Glenbhoy (18 May 2006)

> 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.


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?


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## CCOVICH (18 May 2006)

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.



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.


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## Kilkenny Tax (18 May 2006)

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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## Niall M (18 May 2006)

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.


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## CCOVICH (18 May 2006)

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.




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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## bonanza (18 May 2006)

The most tax efficient manner of extracting or spending company profits so far advised in the thread is to - 

1) pay myself extra salary and take a 42% hit or
2) invest more into the pension - which locks it up for a long long time.
_
[distracting comment deleted from this important thread - Brendan]_

BTW I never said my accountant couldnt answer the questions - its just there are lots of answers my accountant gives me which I dont like.


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## OurFella (19 May 2006)

I have a related question. My missus is setting up a limited company in the near future. She will need a car to drive around the country on business. Can she use company profits/money to by the car? If the company is registered for VAT can she reclaim the VAT? Does the vehicle have to be commercial i.e. van, car-van etc..


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## woods (19 May 2006)

If she wants to buy a car and not a commercial she should buy it herself and charge millage to the company. It could be fixed to work out the same.


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## Fintan (21 May 2006)

woods said:
			
		

> If she wants to buy a car and not a commercial she should buy it herself and charge millage to the company. It could be fixed to work out the same.



I think that depends on the type of job. 

Im pretty sure someone whose job is constantly on the road, cannot claim mileage for personal car. Its only if you work in an office and make occasional trips on behalf of the company?


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## woods (21 May 2006)

Fintan said:
			
		

> I think that depends on the type of job.
> 
> Im pretty sure someone whose job is constantly on the road, cannot claim mileage for personal car. Its only if you work in an office and make occasional trips on behalf of the company?


I suppose that it depends on your accountant. Mine allows me to do it. 
I do think that you can write off a non commercial car to the company.


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## CCOVICH (21 May 2006)

woods said:
			
		

> I suppose that it depends on your accountant. Mine allows me to do it.



Only Revenue can 'allow' such treatment.


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## Icarus (21 May 2006)

woods said:
			
		

> I suppose that it depends on your accountant.



Can you elucidate on this a little?


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## woods (21 May 2006)

Icarus said:
			
		

> Can you elucidate on this a little?


My accountant prepares my tax returns and submits them to revenue. He obviously allows what he thinks is correct. He allows me to pay myself a lump sum each quarter from the company account to cover millage that I may have in connection with the business of the company.
I can not say if he is correct in doing this, only that he believes that he is and I thrust him.


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## Brendan Burgess (21 May 2006)

Hi Woods

I would say that you are on very dodgy ground here. The Revenue does not like lump sum payments. Check the Revenue rules on mileage allowances. If you get an audit, you will probably pay extra tax, interest and fines. 

Brendan


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## bearishbull (21 May 2006)

bonanza said:
			
		

> The most tax efficient manner of extracting or spending company profits so far advised in the thread is to -
> 
> 1) pay myself extra salary and take a 42% hit or
> 2) invest more into the pension - which locks it up for a long long time.
> ...


Or start a new business(subject to your memorandum of association) renting a boat to take advantage of capital allowances as shown in the unison link


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## contemporary (22 May 2006)

Brendan said:
			
		

> Hi Woods
> 
> I would say that you are on very dodgy ground here. The Revenue does not like lump sum payments. Check the Revenue rules on mileage allowances. If you get an audit, you will probably pay extra tax, interest and fines.
> 
> Brendan



Cant really see how that is a problem, if he was a mileage claim of €1000 a month for 3 months and then pays himself €3000 in month 3, considering he isnt paying himself for 2 months I cant see how "doing himself" is going to incur interest, fines or extra tax


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## bonanza (22 May 2006)

What about a 'pool' car ?
USe the company profits to buy the car and pay for all related charges - road tax, insurance, petrol etc.

Is this allowed ?


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## contemporary (22 May 2006)

you'd get stiffed with BIK


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## bonanza (22 May 2006)

bearishbull said:
			
		

> Or start a new business(subject to your memorandum of association) renting a boat to take advantage of capital allowances as shown in the unison link


 
BearishBull - 
I like the idea, but go through it with me....

I buy a boat with my own PAYE cash ? 
If with PAYE cash then how can it be a comercial boat ?

or if I buy it with Company profit ?
If with company profits then how do I personally enjoy the tax shelter ?

any thoughts ?


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## bonanza (22 May 2006)

contemporary said:
			
		

> you'd get stiffed with BIK


 
Not if its part of a 'car pool'....
Ahh but what then is a car pool ??


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