Best use for company surplus funds?

Pouncer

Hello,

I am self employed via a limited company of which I am the director.

Over the last ten years I have built up a surplus in the company account as a buffer against any future time when work is scarce. I now find inflation and low interest rates threatening the real value of that buffer. I am debt free apart from my mortgage. Currently the figure is around £25k (ETA: the amount if surplus funds, not my mortgage, sorry).

If I take the money out of the company I will pay considerable tax on it. If I pay the money into a pension to avoid tax it will be no use to me short term if the supply of work dries up.

Is there a way to leave the money under company control but invest it securely with returns that exceed inflation? I currently enjoy free business banking.

All other comments about the best way to use this money (sensibly!) would be gratefully received.

Thrugelmir

You'll pay tax to withdraw the money from the Company in any event.

Take a dividend and use the net proceeds to reduce your mortgage debt.

Blackdog

How about using part of it to make an employer pension contribution in case works slows up in the future and you are unable to make future pension contributions.
Also Santander Business Bank sometimes do a fixed rate bond if it is new money coming to them, ie you usually bank with someone else.

Wobblydeb

Got a partner you can employ?

oldfella

my accountant told me I could transfer company funds into a savings account in my name, as long as it didnt get mixed up with my money, and it was transferred directly back into the company accounts. On my personal tax form I put, "Other interest earned from captial being held on behalf of a third party". And interest earned was added to the company P&L.

worked for me.

saverjustice

How can you be self-employed when you are a director?

Kohoutek

saverjustice wrote: »

How can you be self-employed when you are a director?

If you're also the shareholder.

saverjustice

Please explain

Kohoutek

Well strictly speaking you would be an employee of the company, not self-employed, but since a company is just a piece of paper you can see why people in that situation might describe themselves as "self-employed".

saverjustice

I don't deal in assumptions, nor do I consider a company to be 'just a piece of paper'. If 'people in that situation' are mistaken we should not compound the misunderstanding with suggestions that it may be OK to let them think they are self-employed. There are a few government agencies who would think they have 'serious issues' and pay them a visit.

If you are a Director you are technically an employee of the company whether you are paid an income by the company or not even if you are the sole director (don't get me going on that one).

The fact that you are a shareholder does not in itself make you a self-employed person, it is simply a matter of legal entities and a self-employed person can invoice a Company of which he is a director and/or a shareholder for work because they are separate legal entities. With many provisos and exceptions of course.

People come on here for advice, well I assume they do, so any advice you give should be factual. If it is an assumption or a 'myth' then you should declare it as being a personal assumption or 'myth' because otherwise they may as well go down the pub and ask the nearest drunkard for his opinion.

This is not a personal attack, it is simply me voicing my concerns, as simply as I can.

Kohoutek

saverjustice wrote: »

I don't deal in assumptions, nor do I consider a company to be 'just a piece of paper'. If 'people in that situation' are mistaken we should not compound the misunderstanding with suggestions that it may be OK to let them think they are self-employed. There are a few government agencies who would think they have 'serious issues' and pay them a visit.

Jesus Christ, calm down...did he ever try to mislead people that he was a "self-employed" in the strict sense of being a sole trader or partner?

I am self employed via a limited company of which I am the director.

saverjustice wrote: »

If you are a Director you are technically an employee of the company whether you are paid an income by the company or not even if you are the sole director (don't get me going on that one).

The fact that you are a shareholder does not in itself make you a self-employed person, it is simply a matter of legal entities and a self-employed person can invoice a Company of which he is a director and/or a shareholder for work because they are separate legal entities. With many provisos and exceptions of course.

Thank you, please don't insult my intelligence. I am aware a company is a legal person. What I meant by "just a piece of paper" is that a company is an inanimate object that cannot exercise any power independently, only through its directors and agents.

I've heard other directors of single shareholder companies describe themselves as "self-employed" before and as far as I know, they don't evade tax. In a practical sense, they are self-employed. In the eyes of the law, including tax law, they are not self-employed. I guess you must be an accountant since you only appear to see things in black and white.

saverjustice wrote: »

This is not a personal attack, it is simply me voicing my concerns, as simply as I can.

You clearly have a problem with verboseness then, because you could have explained the definition of self-employed for tax purposes in much fewer words.