Corporation tax

dawsinho

I recently se up my own company and my corporation tax is due nine months and one day after my 1st year end… so sometime in 2009.

Instead of keeping my 20% corporation tax monies to one side as such, is it considered bad practice to use the money now and save up the money nearer the time and pay my liabilities? The reason I ask is that I am currently trying clear a loan which has been put up to a nasty 15%... so rather than leaving my money to one side to collect dust (or 6% if I’m lucky) I can help pay of my loan faster, thus paying less interest. :beer:

Thanks for any help,

Daws

nickj_2

i don't see why not , as long as you pay your tax bill by the due date

dawsinho

cheers Nick, thats what i figured. just wondered if anybody has ever been in the same postion?

WHA

Just remember the legal distinction between yourself and the company and the tax consequences of personally taking money out of your company. If the loan is over £5k, then the company pays 25% of the loan value, tax reclaimable once the loan is repaid, and there is also income tax and employers NIC on the interest at official rates, unless you are paying interest back to your company on the loan.

dawsinho

Thanks for your response wha,

I'm not sure if i explained my situation very well... my loan that i am paying off is a personal loan that i took out before i set up my company and i have not used any of the funds for my business. Does this alter the situation? Or do i have to have a clear paper trail where i am putting the money etc? which may then effect what tax etc i pay...

Cheers,

Daws

Lifeisbutadream

Yes.

We put everything back into our business. There is no way we could afford to save the tax money - we pay ourselves the bare minimum to pay the bills etc.

Try and work out as you go how much tax you will have to pay so it wont be so much of a shock though!

heleen

You can lend the money from the business to yourself, and as pervisouly mentioned this incurs a tax charge. Unless you lend it to yourself at the goign Inland Revenue rate, which is 6%.

Your business would need to pay corp tax on teh 6% which is profit but you would only pay 6% to the company so you'r emuch better off than paying 15% yourself.

You could also have teh company give you an interest free loan, in which case thi sis classed as a banefit and you would have to pay tax on the 6% you should've paid. Probably works out as teh best solution.

Hope this helps. I used to do this to set the money against my offset mortgage.