The directors trust,the money farm,EFRBS,profit retention,tax planning,corporation tax planning,IHT advice,how to reduce tax,corporate tax reduction,business planning,financial planning,financial advice,finances,UK income tax,tax strategy
The directors trust,the money farm,EFRBS,profit retention,tax planning,corporation tax planning,IHT advice,how to reduce tax,corporate tax reduction,business planning,financial planning,financial advice,finances,UK income tax,tax strategy
 |
 |
 |
 |
 |
 |
Proud sponsors of
Sound Financial Planning
"The Money Farm is a leading profit
extraction consultancy"
extraction consultancy"
All directors owning their own company are interested in their personal access to profits in a tax efficient way.
An area often neglected is the use of Employer Financed Benefits Schemes (EFRBS).
EFRBS are revenue approved statutory pension schemes but are unlike "traditional" pension schemes.
There is no tax relief for contributions paid in EFRBS but there is no tax cost to the member and no National Insurance either.
Traditional Pension schemes do attract Corporation Tax relief but many directors see these funds as "dead money" due to the investment restrictions placed on the trustee. Directors cannot personally access their own funds until retirements date, nor can they utilize to invest these funds in residential property.
EFRBS Trustees, which will in every case include the directors themselves, are not subject to any investment restrictions. They can lend money to themselves providing it is at a commercial interest rate. They can invest in residential property, which is a favourite investment.
Access of profits of up to £300,000 can be at a rate of tax of no more than 21% leaving the director 79% of his own gross profits
Comparing this with taking a bonus which is subject to Income Tax, often at 40% and National Insurance Contributions (NIC) the director , utilizing an EFRBS, can keep 51% more of his gross profit.
Comparing the 79% to the Director taking a dividend he will keep 33% more of his gross profit.
Many directors and perhaps their spouses take a small salary and then pay dividends to take them up to the maximum income at basic tax rate. This, when we are looking at a married couple almost £70,000 a year and will be taxed at no more than 21%. Any further profits up to the £300,000 level can be contributed tp an EFRBS at a cost of only the loss of 21% Corporation Tax.
A bonus can be subject to 49.69% Tax and NIC.
An area often neglected is the use of Employer Financed Benefits Schemes (EFRBS).
EFRBS are revenue approved statutory pension schemes but are unlike "traditional" pension schemes.
There is no tax relief for contributions paid in EFRBS but there is no tax cost to the member and no National Insurance either.
Traditional Pension schemes do attract Corporation Tax relief but many directors see these funds as "dead money" due to the investment restrictions placed on the trustee. Directors cannot personally access their own funds until retirements date, nor can they utilize to invest these funds in residential property.
EFRBS Trustees, which will in every case include the directors themselves, are not subject to any investment restrictions. They can lend money to themselves providing it is at a commercial interest rate. They can invest in residential property, which is a favourite investment.
Access of profits of up to £300,000 can be at a rate of tax of no more than 21% leaving the director 79% of his own gross profits
Comparing this with taking a bonus which is subject to Income Tax, often at 40% and National Insurance Contributions (NIC) the director , utilizing an EFRBS, can keep 51% more of his gross profit.
Comparing the 79% to the Director taking a dividend he will keep 33% more of his gross profit.
Many directors and perhaps their spouses take a small salary and then pay dividends to take them up to the maximum income at basic tax rate. This, when we are looking at a married couple almost £70,000 a year and will be taxed at no more than 21%. Any further profits up to the £300,000 level can be contributed tp an EFRBS at a cost of only the loss of 21% Corporation Tax.
A bonus can be subject to 49.69% Tax and NIC.
Study 1 - 14th April 2008 - Access to your own profits.
The amount received could be as low as £5,230.00
As a dividend the net figure is £5,925.00
Utilizing an EFRBS the net figure is £7,900.00
Which would you prefer?
As a dividend the net figure is £5,925.00
Utilizing an EFRBS the net figure is £7,900.00
Which would you prefer?
To summerise