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"
Study 2 - 14th April 2008 - Taxation Of Invetments In EFRBS
With effect from April 2006 income tax on investments held directly by the Trustees of an EFRBS are taxed at the Trust Rate of 40% and capital gains at 18%. However, as this is the same as the likely taxation if the investments were to be held by the individual personally it must be remembered that as profits have been accessed up to 51% more efficiently than taking a salary or a bonus there are simply more funds to invest.
Being taxed at 40% by holding the investments directly clearly suggests the Trustees do not hold them directly.
Do Trustees want to pay 40% or would they prefer half this figure namely 21%?
Assuming the obvious answer this is wonderfully easy to achieve.
Contributions to the Trust are invested into an off the shelf company which in turn is wholly owned by the Trust. This can be done by the company issuing shares, which are bought by the Trustees, or alternatively the funds can be lent to the Company at a commercial rate of interest. Either way all investments are made within this investment vehicle. Profits on investments 0f up to £300,000 a year will be taxed at the current rate of 28%.
If these profits are realised and required, let us say for a loan to the member, they are paid as a contribution to the EFRBS at no further tax charge.
The Trust receives a contribution from the Company it owns.
More of the founding Company's profits are retained, up to 51% more.
They are reinvested at only 29% tax on income and capital gains.
This is nearly 30% less than the individuals higher rate tax.
Being taxed at 40% by holding the investments directly clearly suggests the Trustees do not hold them directly.
Do Trustees want to pay 40% or would they prefer half this figure namely 21%?
Assuming the obvious answer this is wonderfully easy to achieve.
Contributions to the Trust are invested into an off the shelf company which in turn is wholly owned by the Trust. This can be done by the company issuing shares, which are bought by the Trustees, or alternatively the funds can be lent to the Company at a commercial rate of interest. Either way all investments are made within this investment vehicle. Profits on investments 0f up to £300,000 a year will be taxed at the current rate of 28%.
If these profits are realised and required, let us say for a loan to the member, they are paid as a contribution to the EFRBS at no further tax charge.
The Trust receives a contribution from the Company it owns.
More of the founding Company's profits are retained, up to 51% more.
They are reinvested at only 29% tax on income and capital gains.
This is nearly 30% less than the individuals higher rate tax.
By utilizing an EFRBS Company Profits can be accessed 51% more efficiently than by taking a salary or bonus.
To summerise