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Helping Alan extract cash from his company tax-efficiently

With retirement approaching, Alan was keen to find out if he could move money out of his company without incurring a large tax liability.

Our client Alan was 48 years old when we were introduced to him by his accountant. He was the major shareholder of a successful engineering firm which he had run for over 15 years and he earned a good living from his endeavours. Whilst the early years of the business had been somewhat of a struggle, he was now in the fortunate position of having accumulated significant cash reserves in the company. However he still had some financial frustrations and concerns and asked us whether we could help.

Immediate issues to resolve
Alan was keen to know whether the substantial company reserves and cash in the bank could be moved into his personal account efficiently. He wasn’t receiving any information or guidance from his accountants and wanted pro-active advice. With retirement around the corner, the issue of how best to ‘exit’ from his business had become urgent.
Our initial recommendations and actions

  • We carried out a comprehensive review of his tax and financial arrangements and provided an impartial second opinion on the financial decisions he had already taken.
  • We re-arranged the shareholding of his company to include family members and senior management.
  • We reviewed and adjusted how he paid himself – to achieve an efficient balance between salary, dividend and bonus.
  • We set up tax-efficient structures that removed company profits on which tax had been paid.
  • We sought specific guidance from tax, legal and accounting specialists (including from his previously accountants) to ensure that all documentation and actions were effective.

The results so far

  • Over £800,000 has been moved from the company reserves into the hands of Alan and his family with no tax liability.
  • Now that the capital is in his hands Alan has peace of mind. The money is also sheltered from inheritance tax and capital gains tax and is out of reach of possible company creditors.
  • Alan now has greater choice: the actions we initiated have enabled him to get closer to securing sufficient funds for him to retire – should he so wish.

Please note that although this story is based on a real client, we have changed their name and aspects of their personal information to protect their privacy and identity.

12 January 2024

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