You should not pay Corporation Tax on it. You are effectively going to be double taxed on it.
Depending on your year end, it's probably too late to put it in a pension.
So pay it to yourself as salary.
There are loads of threads on this on askaboutmoney.
But also get your accountant's advice.
Do NOT pay it to yourself as salary if you don't need the money.
If you leave it in the company, subject to corporation tax at 12.5%, you may be able to get the remaining 87.5% out either tax free (using retirement relief, after you turn 55) or subject to CGT (currently 33%, which still gives you a better rate than current income tax rates) on a future sale or liquidation if you don't qualify for retirement relief.
How would the OP qualify for retirement relief?
If he gets up to €750k out of the company by selling the shares or liquidating the company and meets the following condition:
- company is a trading company for the past ten years
- he has been a director for at least ten years ending with the disposal
- he has been a full time director in the Co for five years
- he is aged over 55
- the shares have been held for at least 10 years.
But the accumulated cash on deposit, or held in investments, or whatever the company does with it, will not be part of the chargeable business assets of the company..?
There's an explanation and example at Para 3.5 of the Revenue Operational Manual here:
[broken link removed]
In the case of an IT contractor it's unlikely they'd qualify for much/any CGT retirement relief - no-one can buy the trade and its goodwill from them, since it is personal to them, and they are unlikely to have any meaningful trading assets that would be chargeable assets.
Ditto on a liquidation, see para 3.13.
If you work through that example you see that the cash (together with the stock) falls out of the calculation and so, provided a person does not have investments in their company, they will fully qualify for retirement relief.
That is in circumstances where the cash is a trade asset ie working capital - if the OP accumulates 50k cash for 20 years and has a pot of a million on deposit, that is not going to fly.
Well, one million would be over the threshold.
But, in any case, the formula set out in the legislation refers to "chargeable assets". Euro currency is not a chargeable asset and so it falls out of the equation.
My year end is two weeks awag. Hence the question.
I am only 33 so not entitled to retire yet.
But thats exactly what im wondering if I left it in company would I be able to take it out tax free at retirement age. Effectively only paying corporation tax
Instead of 52% tax now
I dont need the money now.
I have searched for other threads on this question. Can someone please send me links to them.
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