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
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To summerise
Study 3 - 15th May 2008 - How is it advantageous to own two companies?
Should any director wish to enter a different business they often wish to separate it from the existing successful business, to keep the risk of a new venture away from the existing business.
A major drawback of having another Company is that they then share the Small Business Corporation Tax band of £3000,000 giving each company a separate band of £150,000. The small business band is currently 21% and profits in excess of this up to £1,500,000 will be taxed at a rate of c.32.75%.
The problem arises if the original company makes a profit of £300,000 or more and the new Company perhaps in the early years fails to make much profit.
If the second Company is a trading company and is owned by an EFRBS then each Company has it's own separate band of £300,000 at the lower rate because they are not associated.
Where the individual owns both Companies and both Companies make profits of £300,000 the total amount of Corporation Tax due is shown below:
£150,000 @ 21% = £31,500
£150,000 @ 29.75% = £44,625
_______
£76,125
Where an EFRBS owns one of the Companies the position is as below:
£300,000 @ 21% = £63,000
This applies to each Company therefore the total tax bill IS £126,000 thereby saving £26,250 a year!
The control of the Company is exactly as it would be if the individual owned the shares, he decides who will be the Company Directors and what salaries will be paid etc.
A major drawback of having another Company is that they then share the Small Business Corporation Tax band of £3000,000 giving each company a separate band of £150,000. The small business band is currently 21% and profits in excess of this up to £1,500,000 will be taxed at a rate of c.32.75%.
The problem arises if the original company makes a profit of £300,000 or more and the new Company perhaps in the early years fails to make much profit.
If the second Company is a trading company and is owned by an EFRBS then each Company has it's own separate band of £300,000 at the lower rate because they are not associated.
Where the individual owns both Companies and both Companies make profits of £300,000 the total amount of Corporation Tax due is shown below:
£150,000 @ 21% = £31,500
£150,000 @ 29.75% = £44,625
_______
£76,125
Where an EFRBS owns one of the Companies the position is as below:
£300,000 @ 21% = £63,000
This applies to each Company therefore the total tax bill IS £126,000 thereby saving £26,250 a year!
The control of the Company is exactly as it would be if the individual owned the shares, he decides who will be the Company Directors and what salaries will be paid etc.
Over say a 10 year period such simple planning could save as much as £262,000