How to take cash out of business in a tax efficient manner

k06351000

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A while back I made a post about taking a loan from a company of which I own 25% and am a director. The advice I got was very helpful and suggested taking a loan as a director was not straightforward.

The money was left in this company (after the sale of a sister company) in case anybody in the family wanted to start another business and as it would have heavily taxed at the time.

Basically the company has about 2m in assets. 1.6m invested in various managed funds and the rest tied up in less liquid assets such as investments in other companies, property etc. Nobody is currently paid a salary from this company.

I am currently in a public sector role currently earning 40k per year which will hopefully rise to 70k by retirement. I calculate that the pension I earn from this role will be quite small (even smaller if I retire before 70- which I would love to do).

Basically I would like advice on how best to use this money to fund my retirement.
.

I am thinking if I leave my public sector job aged about 55 or maybe work part time, then I can become a salaried employee of the company and put the maximum amount of my salary allowed into a pension. Ideally keeping my salary low enough not to pay any higher rate tax but high enough to put a good amount into a pension.

I have been looking into director’s pensions etc - but not sure where to get good information


If I take the money as a dividend can it still be put in a pension?

Can anyone recommend a good pension advisor who would have a good understanding of the public sector single pension scheme and also directors pensions and how they work?
 

Steven Barrett

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You need to start paying yourself a small salary from the business so you have an earning history. You can increase this in later years to increase the pension funding. Having no income from the business is not a benefit from a pension funding point of view. The Revenue will check your income history when doing their funding checks. There is no way to get money out of a company and into a pension without a salary.

You should also be looking at things like Entrepreneurial relief and Retirement relief but there is too much money in the company at present to benefit from them.

Steven
www.bluewaterfp.ie
 

torblednam

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Is this company actually carrying on any trade itself, or just sitting there with a load of money / assets in it?
 

k06351000

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Company has invested in some other companies and is doing a very small amount of trade, mostly is sitting there with cash.

Would I be right in thinking that 20 years of income from the company should be sufficient for revenue. I.e. if pay myself a salary from age 45 it should be enough to draw down a pension at 65
 

RedOnion

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Company has invested in some other companies and is doing a very small amount of trade, mostly is sitting there with cash.

Would I be right in thinking that 20 years of income from the company should be sufficient for revenue. I.e. if pay myself a salary from age 45 it should be enough to draw down a pension at 65
You, and the other owners, really need proper tax advice and planning on how to efficiently get money out of the company, or what the long term strategy is. Leaving that amount of cash in a company without a plan makes no sense.
 
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k06351000

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You, and the other owners, really need proper tax advice and planning on how to efficiently get money out of the company, or what the long term strategy is. Leaving that amount of cash in a company without a plan makes no sense.


Of course.

Look I’m not very involved in the company but those there are have definetky taken tax advice, I wa more wondering from my own personal point of view.

We had someone from corn market in recently selling avc’s and exposing how small our department pensions will be, I was just concerned that my position with this company means that it may not make sense to buy avcs
 
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