The company saves Corporation Tax of 12.5% of the value paid out in salary.
The above assumes the company has no other money. Of course this is possible but how realistic is it? If the prior-year profit is entirely distributed as salary (eg financed by the net after-tax profit brought forward plus the anticipated Corporation Tax refund/credit) the Corporation Tax cost to the company is zero.
Of course. But it's only part of the picture. When you withdraw the money as salary in the later year, the company gets a corporation tax deduction for the amount of the salary - effectively a refund of the corporation tax paid originally on that sum.
Yes, it's pretty much indefinite. Beware though of your own work circumstances changing in the meantime!Hi Tom,
How many years can you carry this forward for? Say I leave x funds in my co now and pay CT. Can I then pay myself a low salary in 10 years time and get a CT tax refund from the CT tax paid 10 years previously?
When you withdraw the money as salary in the later year, the company gets a corporation tax deduction for the amount of the salary - effectively a refund of the corporation tax paid originally on that sum.
It's not really an effective refund of that tax.
It's not at all an effective refund of that tax!
I am baffled why T McGibney keeps saying it is!
It's not really an effective refund of that tax.
Say the profit is €100k. €12.5k of tax is paid, leaving €87.5k on the balance sheet. Unless the €100k is withdrawn as salary the following year creating a loss to be set back against the prior year's €100k profit, the original €12.5k is lost.
Otherwise it's just being offset against "other" profits.
You know, I did know that once upon a time. My dotage is already setting-in.
But the point still essentially stands - if this payment is not made in the following period, but perhaps in the period after the next period, then you have suffered twice.
Possibly but certainly not necessarily. Again I fail to see how this is in any way controversial and needs people to be "diplomatic" etc
But T McGibney, that isn't what you said. Your analysis regarding the tax position is fundamentally flawed.
Put simply, it's erroneous advice.
It's not erroneous advice. Not because it's necessarily incontestable or even perhaps correct, but because it's not advice......
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