Pay Corporation tax or more PAYE?

E

elleirbag

Registered User
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Hi Folks,

I am a director in my own limited company ( I am the only company employee)

If I pay corporation tax on my profit, am I right to think that if i take any of the remaining money in the company i.e post tax balance for my personal use then I pay PAYE on anything I take out of the company.

Reason I ask if I want to take the money out of the company am I not better just taking out the full whack, paying my PAYE and not bothering about corporation tax....because if I pay corporation tax, then pay PAYE on the remainder am I just costing myself an additional 10% tax for nothing?

ANy advice would be hugely appreciated
Thanks Ella
 
How much money are we talking? If it is a lot why bother taking it all out of the company if you are not going to spend it personally and your company may need the money/reserves.

I presume your business is still trading.
 
Hi Jack2009.
Amount of money is 40- 50 K, and now please excuse my ignorance...why would my company need the cash reserve...I am an IT contractor and don;t have any realy investment in assets.
Thanks
Ella
 
What you plan for the company depends on why you would may need the cash for. in this climate it might be just to pay bills on an on going basis if your clients delay/sop paying you.

At 40 to 50k I would say just take out your salary of 40 to 50 k.
 
The Company will be taxed on its profits. Provided you do not have any investment income or undistributed investment income you will not be hit with a surcharge.

If you are keen to get the money out, you could pay yourself a dividend.
Of course you will have dividend withholding tax here and you will also be taxed personally on the income.

Another option is that you orderly wind up the Company and get a liquidator to distrubute the funds to you. As you would seeing to get a distribution in payment of your shares you would only be paying the capital gains tax rate of 23% (I think, i know it increased following budget)
 
If you are an IT consultant, you are not only charged to CT at 12.5%, you are also liable to the close company service company surcharge on undistributed income, which is in addition to the Corporation Tax.

This is a liability payable on funds not distributed from the company within 18 months of the accounting year end.

Speak to your accountant - he should have already told you about this surcharge.

You can pay this by dividend, with 20% withholding tax, and pay any balance when you complete your personal tax return - deferring the tax payment.

You may want to consider paying dividends rather than salary to defer the tax.
 
JQ2002 said:
Another option is that you orderly wind up the Company and get a liquidator to distrubute the funds to you. As you would seeing to get a distribution in payment of your shares you would only be paying the capital gains tax rate of 23% (I think, i know it increased following budget)
Click to expand...

Are you actually suggesting liquidating the company annually and starting up a new company the following day? We are only talking about 40 to 50k not 4m to 5m. So the tax savings would easily be eaten up by professional costs and presumabily a challenge from the Revenue Commisssioners!

The wind up option you are talking about should only be used when the business closes for some reason or another. But, will the CGT advantage exist at that stage???
 
Jack2009_I'm merely suggesting the option of a wind up if the trade is to cease.

Many small companies with small cash balances of 40k-50k go through an orderly wind up. Professional fees for this type of wind-up would be low.
 
Thanks for the clarification, it is clear in this instance that the company will continue to trade for some time now.

Best of luck
 
This has been answered on other threads here, and quite a detailed thread it was too ! (I know becasue I contributed to it then but its lengthy and detailed, and I suggest you check it out)
 
Hi All,
Thanks for the great advice...
Yes I will just pay the PAYE, just had a conversation with the accountant and he now agrees that this is the most efficient way of dealing with it.

Sheesh!
 
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