Investing company cash

D

Designjet

Registered User
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Hi guys, can anyone give me the ups and gowns of investing cash in a company.

I'm thinking of using 240k which is dotting in cash to buy an apartment for 240k. The expected rental is 1600euro per month.

The cash is not required for day to day living or company expenses.

Cheers
 
Shockingly bad idea, generally.
Say capital gains as an example. Company pays CGT on gains. Then you pay tax again to get it out.
Why have you got do much money in the company?
You need to get a good tax adviser to look at your overall situation, and long term plans.
 
Two things come to mind which you'd need to check;

Check your M&A to ensure you have the scope to get into property. Usually they are written broadly enough but you want to make sure you don't act outside your M&A

Get tax advice on treatment of the revenue. If it isn't considered operational revenue you will be paying a higher tax rate on it and it will complicate your accounting.

The other question is whether you can get a better return on capital by investing in your core business. For example, I'm currently upgrading systems which should return 20+% ROI. If you're looking at single digit returns, should you consider returning capital from the company .
 
Hi Guys, Thanks for the reply. More info.

So, my company provides professional services and does not require any investment going forward. I am the sole employee.
I have a self directed pension with a fully owned apartment in a good location (Dublin) generating 24K in rent per year. (value has increased by 150k from when I purchased it in 2010). The value of the pension is 500K approx and growing.

I have a couple of streams of income so the fees into my professional company are generally untouched and have grown since 2016.

My plan is to use the funds which are just resting in the company and purchase a property (commercial or residential) and to grow the funds by the rental income of say 20K per year minus tax at 20%. (I believe this is the tax rate)

My future plan is to maximise funds in the company and then to liquidate the professional company at the age of 55+ and avail of the tax relief of 750K.

My Pension allowances are boxed off as mentioned above.

I would plan on selling the property pay the relevant CGT a couple off years prior to the liquidation.


Any further advice?

DJ
 
There are a few red flags here. Is your company subject to the close service company surcharge as well as the close company surcharge? One is a surcharge on undistributed professional trading income, the other is a surcharge on undistributed investment income?

You already have an apartment in your pension; why do you want another? Presumably you own your own home also? There is an investment universe beyond bricks and mortar on a little island on the periphery of Europe.

Have you looked at backfunding your pension? i.e. sticking the €240k into your pension and buying a diversified pot of global equities?

The rent would be taxed at circa 40% (25% plus a circa 15% surcharge). The company will also pay CGT on any realised uplift.
 
Gordon Gekko said:
There are a few red flags here.
Click to expand...
I was thinking the same. Tax isn't my area at all, but this sounds like the kind of hair brained scheme I would come up with before reading a hundred anti-avoidance measures!
The whole thing is to avail of retirement relief, as far as I can see. Is it even possible to avail of retirement relief from a company where the only asset is cash? I know some of the other CGT reliefs only allow a commercially necessary amount of cash.
 
Yes, it actually is, but it’s the doubling and tripling down on Irish property and the pension piece that worry me most.
 
How about putting the money into my pension fund which is being managed by Harvest and purchasing the apartment that way? There is cash sitting in a rental account already with Harvest.
 
Depending on your risk appetite, you could look into the Enterprise Investment Scheme (EIS). Tax advantaged and diversification benefits.
 
Designjet said:
Hi Guys, Thanks for the reply. More info.

So, my company provides professional services and does not require any investment going forward. I am the sole employee.
I have a self directed pension with a fully owned apartment in a good location (Dublin) generating 24K in rent per year. (value has increased by 150k from when I purchased it in 2010). The value of the pension is 500K approx and growing.

I have a couple of streams of income so the fees into my professional company are generally untouched and have grown since 2016.

My plan is to use the funds which are just resting in the company and purchase a property (commercial or residential) and to grow the funds by the rental income of say 20K per year minus tax at 20%. (I believe this is the tax rate)

My future plan is to maximise funds in the company and then to liquidate the professional company at the age of 55+ and avail of the tax relief of 750K.

My Pension allowances are boxed off as mentioned above.

I would plan on selling the property pay the relevant CGT a couple off years prior to the liquidation.


Any further advice?

DJ
Click to expand...
You might consult your accountant on the possibility of the company buying a property abroad as part of your pension ,
Or as part of a company bonus system for staff ,Portugal are offering tax incentives to people outside the state at present
As I sell overseas property I am based on the Wexford Carlow border if you need professional advice I can put you in touch with a professional in this field
 
Itchy said:
Depending on your risk appetite, you could look into the Enterprise Investment Scheme (EIS). Tax advantaged and diversification benefits.
Click to expand...

They're closed at the moment and will open up again in October/ November. Only investing in small to medium size businesses in Ireland is a pretty risky investment in search for tax relief.


Charlie Meyler said:
You might consult your accountant on the possibility of the company buying a property abroad as part of your pension ,
Or as part of a company bonus system for staff ,Portugal are offering tax incentives to people outside the state at present
As I sell overseas property I am based on the Wexford Carlow border if you need professional advice I can put you in touch with a professional in this field
Click to expand...

Pensioneer trustees shouldn't allow the purchase of a property in Portugal for a pension. Too difficult to ensure the apartment in Portugal isn't used for holidays for the client and all their family.


Steven
www.bluewaterfp.ie
 
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