Ltd Company with over 100K in cash

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Scouser

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This money is sitting there and not required to run the business, what are the most tax efficient ways to invest this?
 
Hi Scouser, the most tax efficient way would probably be to invest as much of it as possible in an executive pension plan (as long as you have scope). This way you avoid paying corporation tax, PAYE, PRSI and USC on the contributions.

You also may be subjected to the corporation tax surcharge of 20% on the money if left sitting in the account depending on the size of your company and nature of your business.
 
Thanks, lets say I put most of it into a pension, if at some stage in the future the business needs the cash, can I take it back from the pension? What penalties would I face then?
 
No you wouldn't be able to take the money until you reach retirement age (earliest is 60 unless you sell your shareholding and cut all ties beforehand). The pension would be set up for you (or say a co director or spouse) under the company name. When you do take pension benefits, you could use the tax free portion and reinvest in in the company if you wanted as it's your own money.

However, it's probably not the most efficient method so for that reason if you think you will need access to some money in the near future then you would be better off not putting all of it into a pension. Quite popular at the moment are life assurance bonds / savings plans as they offer far higher returns that deposit account with the banks. I would advise keeping some money in a handy easily access account though as an emergency fund!

You could alternatively just take the money out as salary and pay all the various income taxes on it.
 
As a slight aside what's the tax treatment on corporate investments. Is it dependent on the investment choice, i.e if its a life fund then gross roll up, something taxed under CGT regime or is it non trading rate income at 25%
 
We have corporate clients, who have surplus funds but have good reason to want to keep the access to the funds i.e. full liquidity. Some of these reasons might be 1) a cash buffer in case required during the next downturn, 2) keeping funds available for retirement relief and 3) keeping funds liquid with a view to maximising pension funding later on when there is better visibility as to whether or not they can give up access to the funds.
We can set up these investment bonds in the company name with full liquidity i.e the funds can be accessed whenever required.
The risk return discussion is vital though, as there are no risk free returns above deposit rates. However business owners tend to run plenty of risk in their business and I suppose investment risk is just another risk to be considered.

The Deposit Guarantee scheme now covers large companies as well as small companies, however only €100k is guaranteed. The new Bank resolution rules in Europe make a depositor bail in or haircut much more likely in the event of any bank failure in the future. There are precedents already of depositor bail in across Europe. FBD recently moved a large amount of funds to bonds because of this bail in risk.

http://www.independent.ie/business/irish/bailin-fears-spur-fbds-150m-move-to-bonds-34965247.html

For companies that have deposit accounts above the DGS limit of €100k this is a risk they need to take into account.
 
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