Cash held in dormant Ltd Co.

soulsaver

I have a low 5 figure sum of cash (after CT, years ago) in an all-but-dormant limited company. It hasn't traded in 5 years.

It earns a tiny amount of interest in the business bank account.

I'd like to access it in a tax efficient way:

Me:

I'm a 99% share holder, there are no debts, I'm not trying to shaft anyone.. other than possibly HMRC...:) & then only legally.

I don't have earned income in HMRC terms.

I'm a tax payer from state & private pensions and other unearned income (interest & dividends) so PA is used up every year.


So:

Is there a tax efficient way I can get the cash in the company into my SIPP and maybe get the tax relief going in?

Any other tax efficient suggestions?



I'd consider winding the co up if that freed the cash up without tax?

kidmugsy

I understand the if you wound the company up you'd make a Capital Gain taxed on favourable terms i.e. you'd be able to set your annual CGT allowance against it, and then pay 10% tax on the rest by claiming Entrepreneurs' Relief.

But in your shoes I'd wait for a non-amateur to come along and support or correct me.

xylophone

http://www.rossmartin.co.uk/companies/ceasing-trading/132-ceasing-trading-overview

Or perhaps you could take an income from the company and contribute to your SIPP?

chrismac1

Do you have £5k or more in dividend income which is not in a SIPP or ISA? If not, declare dividends in your company up to the tax-free £5k level. £5k now and £5k on 6 April 2017, assuming you have retained profits available for the dividends.

Check this approach first with your accountant to ensure you have no circumstances not in your post which would make this strategy unsound.

TheCyclingProgrammer

kidmugsy wrote: »

I understand the if you wound the company up you'd make a Capital Gain taxed on favourable terms i.e. you'd be able to set your annual CGT allowance against it, and then pay 10% tax on the rest by claiming Entrepreneurs' Relief.

But in your shoes I'd wait for a non-amateur to come along and support or correct me.

Unlikely OP would be eligible for ER as the company is not trading and hasn't been for many years.

If the combined gain plus their existing income is below the higher rate threshold they would still be able to get capital treatment and pay the lower CGT rate of 10% though, without needing ER.

OP could take up to £5k a year as a dividend without paying further tax to bring the balance down to the point where the above is feasible if it isn't already.

They could probably also justify some level of pension contribution though there's the theoretical risk that HMRC could claim its not wholly and exclusively for business purposes if the director isn't really doing anything and the business is dormant.

polymaff

Depends what you mean by a low 5 figure sum, whether the company is still needed and how you use your CGT allowances. If the reserves are less than £25,000 and less than your expected unused CGT allowances over up to three consecutive years, and you've finished with the company, take the reserves out and then close the company. If you do all this over a not-more-than 24-month period then the withdrawals will be treated as capital gains under s1030a, meaning up to three year's unused CGT allowances-worth, tax free.

If it is a bit more than £25,000, work it down to £25,000 - might be easier said than done with such a passive company. Then it is all a matter of careful timing.

soulsaver

Thanks for the replies.

FI: It's less than £25k. And I haven't needed, so don't use an accountant... probably why I'm asking on here...:)

If I had any PA to spare, the 'take a salary route & bung it in your sipp' definitely would seem be the way to go.

As it is, that route appears tax neutral which is clearly better than taxed, but I was really wondering if there is a better solution than that.

So it's prob the divi route and/or the cap gain route , either way I'll need to do some homework on 16/17 non ISA/Sipp gains & divs

Neither are above the limits.. but aren't zero either.

If any other ideas come up I'd be much appreciative...

Off to trawl my records for 2016/17...:(

TempUserName123

The dividend route would be the easiest. You could also "advance" the dividends each year by loaning yourself £5,000 at the year end, but repaying it immediately the following year with a dividend. This would cut the withdrawal period from 5 to 4 years.

Or, you could use the company money to invest in a new project perhaps and kickstart another venture?

kidmugsy

TheCyclingProgrammer wrote: »

Unlikely OP would be eligible for ER as the company is not trading and hasn't been for many years.

Thanks for that. How many years can one safely leave money in a dormant company before risking the loss of ER?

TheCyclingProgrammer

kidmugsy wrote: »

Thanks for that. How many years can one safely leave money in a dormant company before risking the loss of ER?

Up to three years after you stop trading.

https://www.gov.uk/entrepreneurs-relief/eligibility

soulsaver

QuickRebates wrote: »

The dividend route would be the easiest. You could also "advance" the dividends each year by loaning yourself £5,000 at the year end, but repaying it immediately the following year with a dividend. This would cut the withdrawal period from 5 to 4 years.

That could work: I haven't laid '15/16 accounts (due next month) so I could take a £5k divi in creditors due, and another £5k to be shown in '16/17 results and then ...