Brendan Burgess
Founder
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A friend of mine has raised a scheme which a neighbour of his has used. I have dismissed it as rubbish, mainly because it's not what the relief was intended for. He has said that his accountants also say that it's legitimate. I have told him to get his accountants to write down exactly how the scheme would work.
But this is how he describes it...
He is 60
His company earns about €100k profits before he takes a salary.
It has net assets of around €100k.
He works full time and the business is dependent on him, so I doubt it would be worth anything other than net asset value if he were to cease working for them.
He sells his son, an employee, one share.
The company buys the balance of the shares for €750k.
The company now owes him €750k.
He continues to work for the business but does not draw a salary.
The company makes a profit of €100k on which it pays Corporation Tax of 12.5%.
The company pays the remaining €87,500 to him to pay down the loan
After about 8 or 9 years, the loan is paid off.
Is there any basis for this at all?
Can a company buy back shares if it doesn't have reserves or a share premium account?
I understand that if a third party were to pay him €750k for the company, he would qualify for retirement relief.
Brendan
But this is how he describes it...
He is 60
His company earns about €100k profits before he takes a salary.
It has net assets of around €100k.
He works full time and the business is dependent on him, so I doubt it would be worth anything other than net asset value if he were to cease working for them.
He sells his son, an employee, one share.
The company buys the balance of the shares for €750k.
The company now owes him €750k.
He continues to work for the business but does not draw a salary.
The company makes a profit of €100k on which it pays Corporation Tax of 12.5%.
The company pays the remaining €87,500 to him to pay down the loan
After about 8 or 9 years, the loan is paid off.
Is there any basis for this at all?
Can a company buy back shares if it doesn't have reserves or a share premium account?
I understand that if a third party were to pay him €750k for the company, he would qualify for retirement relief.
Brendan