Company has 40k profits after tax, can I invest ir

maxwell smart

My company made 40k profit last financial year after tax. I'm a director along with my wife. Can I invest this money on behalf of the company and if so what tax rate will be payable if there are any profits on it? Do I just pay corporation tax?

I am meeting the accountant next week but want to have a few ideas for him,

displaced dub

My company is in a similar place re profits after tax, you can buy shares with them but they stay in the company name not yours or your wifes.

When you sell them they go back into the company and any profit is taxable as far as i am aware at corpo tax level. All you need is a company stamp for when you go to sell them from memory.

I just left my profits in the company this year after i paid the corpo tax... Rainy day and all that. you could put the money into a self managed pension fund too.

git_ireland

displaced dub wrote: »

I just left my profits in the company this year after i paid the corpo tax...

Thats exactly what I did altought I put it into a deposit account with 30 days notice for access. Making something on it but not a lot. Handy to have it there just incase.

displaced dub

git_ireland wrote: »

Thats exactly what I did altought I put it into a deposit account with 30 days notice for access. Making something on it but not a lot. Handy to have it there just incase.

Got a call from PTSB offering me 3% interest on business account waiting for AIB to come back to me about what they will do for me.

Where are you banking and how much interest is being paid?

uberwolf

Do your memo and arts say you can invest?

git_ireland

displaced dub wrote: »

Got a call from PTSB offering me 3% interest on business account waiting for AIB to come back to me about what they will do for me.

Where are you banking and how much interest is being paid?

BOI and have 4% for 6 months. its a fairly sizeable sum aswell.

panacea

You should get your accountant to go through the impact of close company provisions with you when you meet next week.

"A surcharge of 20% is payable on the total undistributed investment and rental income of a close company. Close "service" companies are also liable to a surcharge of 15% on one-half of their undistributed trading income."

http://www.revenue.ie/en/tax/ct/close-companies.html

ofjames

maxwell smart wrote: »

My company made 40k profit last financial year after tax. I'm a director along with my wife. Can I invest this money on behalf of the company and if so what tax rate will be payable if there are any profits on it? Do I just pay corporation tax?

I am meeting the accountant next week but want to have a few ideas for him,

There are three aspects you need to consider:

1) Corporation tax

There are two rates of corporation tax in ireland:

a) 12.5% on trading profits

b) 25% on passive income (any income derived from other than the core trade... eg investments)

Should you invest the money in the company's name the company will pay corporation tax of 25% on any dividend or interest income it receives. Credit will however be given for any withholding tax applied to these dividends or DIRT applied to interest to ensure you dont pay more than a 25% effective rate of Irish tax.


2) Close company surcharge

As panacea rightly points out, any income derived by a company from investments but not distributed on to shareholders will be subject to the 20% close company surcharge.


3) Capital gains

Any capital gains made by the company will be subject to CGT on disposal of the relevant assets @ an effective rate of 25%.

Any capital losses meanwhile will be restricted for use by the company alone against any future capital gains it makes (ie you or your wife will not be able to utilise such losses against gains made in a personal transaction)


I guess the most important thing to be aware of is that any profits derived from investments by your company (be it in the form of annual income or capital gains) will ultimately be subject to a double charge to tax.

Firstly your company will pay at least one form of tax on these profits (be it CT, Surcharge or CGT), then when you come to distribute these profits by dividend the shareholders (i assume you and your wife) will have to pay income tax at your marginal rate (up to 41%+IL+PRSI). I'm a chartered accountant BTW

maxwell smart

ofjames wrote: »

There are three aspects you need to consider:

1) Corporation tax

There are two rates of corporation tax in ireland:

a) 12.5% on trading profits

b) 25% on passive income (any income derived from other than the core trade... eg investments)

S

Thanks for all that info. A quick question, if a company was set up with the specific core activity of investments, would it then still be liable for the 25% extra tax on top of corporation tax?

Thanks