150K surplus

[FirstaidKit]

Hi, I have run a small business for 30 years, it has a turnover of €1.5 million. Although I know self praise is no praise, I am proud of my cash flow management; that in all years, the business has never had a bank overdraft nor a bank loan ( except a lease for a van). The business operates comfortably with a 150k working capital in the current account, with an additional 150k on deposit. I hope to retire in five years and don't expect to spend anymore money on capital items so the 150k deposit is just gathering dust. My question is whether I should put the 150k into my pension or keep it in the business to enhance the balance sheet if I go to sell it near my retirement. I already have a healthy pension fund but feel the 150k would work better for me the pension. Any thoughts appreciated with thanks.

 

[Steven Barrett]

Put it in your pension. Having €150,000 in cash only increases the cost to the buyer by €150,000.

 

[Brendan Burgess]

The business operates comfortably with a 150k working capital in the current account, with an additional 150k on deposit.

I have run a small business

OK, so you have a small business with €300k cash.
You presumably had a written plan which set out why you should retain such high profits and cash in the company?
Dust down that plan now and see what the strategy was for getting the cash out.

 

[Brendan Burgess]

In the unlikely event that you just carelessly retained profits in the company and paid unnecessary Corporation Tax over the years...

Then sit down with a tax advisor before doing anything.

You already have a healthy pension fund which suggests that any money drawn down from your pension will be taxed at about 50%.

It is possible that you could get Entrepreneurial Relief or Retirement Relief on the sale of the business.

You need specialist tax advice on this. Get it now well in advance of selling the business.

 

[T McGibney]

You presumably had a written plan which set out why you should...

Small businesses rarely if ever invest in written tax plans Brendan.

It's impossible to meaningfully advise the OP without knowing more about what their company does and the current and contingent risks it faces.