Redundancy as Director

T

technophile

Registered User
Messages
5
Hi all,
I was thinking of winding up my company but the increase of CGT to 33% in the last 3 years is putting me off as I will end up paying a huge amount of tax on top of what I have already paid in paye and other charges. I was told before by another accountant that I could claim redundancy and write some of this off but my own accountant is telling me as I director I flat out cant claim redundancy. i am also an employee in my company. Any info or enlightenment on this situation would be much appreciated.
Thanks,
tp
 
Yes. Get a new accountant.

A statutory redundancy payment cannot be made to a director of a company. This is correct.

However a Non-statutory redundancy payment (or otherwise called a Golden Handshake) can be treated in a special way and some or all of it paid tax free to a retiring director.

http://www.revenue.ie/en/tax/it/leaflets/it21.html

Hope this helps

capnhand
 
Ok I had looked at that revenue link before but could not make sense out of it so thanks for the reply. So just looking at the link again.
If I had worked in the company for 10 years I would be exempt for €765 X 10 + €10160 = €17925

So say I had €100k in the account that means I would pay CGT on
€100k - €17925 = €82075

Sound correct?

I suppose I am looking for a way of winding up the company or extracting money out of it the most tax efficient way. I'm also leaving the country for a year if that makes any difference to how I can do things?
Thanks,
tp
 
Hi

Yes but that is not all that can be done both on the income tax side or the CGT side. This can be a complex area that can be based on the circumstances.

I think in this situation paying a reasonably small fee to a good accountant or tax adviser to sit down and take a proper look at the history of the company, your salary over the last 3 years, your proposed exit strategy etc would be well worth it.

There may be more efficient ways to extract money from the company with just a little thought.

Hope this helps.

Kind Regards

capnhand
 

I understand that this may be the case. Whilst it is not my issue right now working most of the hours gave me (apart from the odd light relief to post on AAM) I am finding it very hard to find good advice on these issues. I'm all for paying a fair share but when one is taking a lot of personal risks, at times foregoing payment and pumping all money and energy into a company, it would be nice to have clearer and transparent methods of reaping the benefits eventually. I mean at the moment as a director and employee you get to see both the employee and employer pain of the tax and prsi contributions i.e. the real costs of employment. The personal satisfaction is great but I sometimes wonder if directors are penalized over normal employees with extra regulation just for the gumption to take the chance to build something.
 
I hear ya but I'm on my 3rd accountant already and dont really want to be changing around again or have time to do so until I leave. I was hoping to get this info here as I'm sure the jump of CGT from 20% to 33% in last few years is a killer for many people who were hoping to wind up company and pay 20%. So I thought there maybe some other tried and tested methods floating around but maybe not.

I'm definitely not on for paying 33% on top of paye/prsi Ive already paid as I think this is a bit of a rip off. Anyway thanks again for reply.
 
In principle I think that the idea that you have to pay CGT on top of PAYE is incorrect. If you have paid PAYE then it's gone out of the company.

The fact that the money is in the company suggests that your have paid Corporation Tax at 12.5% on it.

While I actually agree that there should be a provision in the tax code for a CGT exemption or reduced rate of CGT on original ordinary shares, there is not so unless you are over 55 and can claim retirement relief there is a charge to CGT of 33%.

There is a compensation for loss of office which is a function of your average salary over 3 years but as you have decided to sack yourself I'm not sure you could claim that. Personally as anyone earning over €32,800 pays 52% tax why shouldn't you? And all that! Where does it end up:
 

My understanding is a director is entitled to the basic exemption, increased exemption and SCSB and it is definately allowable. Provided of course that it is a genuine case of redundancy and not a scheme or arrangement to avoid tax eg multiple cases of redundancy from the same person or a phoenix company type senario. I have obtained this information verbally from revenue but I would naturally be interested to know if you have any information to the contrary.

They are not entitled to the statutory redundancy.

On your broader point, a taxpayer is entitled to avail of all available tax reliefs to minimise their tax bill. They should pay the tax that they owe but no more.

capnhand
 
Threads like this are an interesting insight into people's attitudes - the OP talks about paying CGT "on top of" PAYE, whereas the reality is that if he were trading as a sole trader, all of the income/profit which he now wants to avoid being taxed on, would have already been taxed, at "PAYE" rates.
 
A director can get statutory redundancy when they are in insurable employment - paying Class A social welfare - employer and employee contributions.

If you own the company then you most likely would be class S social insurance (no employer contribution) and not in insurable employment.
 

Just to clarify, you are talking about statutory redundancy aren't you?

As opposed to a termination payment, to which the same tax rules apply regardless of insurable status...
 
You must log in or register to reply here.
Menu
Log in
Register