Draw 200k lump sum. When do I pay the 100k tax?

businessdit

Hi guys

I have a LTD company (I am the only employee / director in it) and it's got 200,000 cash in the bank.

Next month (Jan 2022) I plan on extracting that 200,000 as a drawing. (I know it doesn't make financial sense... but I need the money for something personally.)

200,000 x 50% tax means there will be about 100,000 in tax due to Revenue.

My question is - when do I pay back that 100,000?

Can I wait until October 2023 when I will be doing my form 11 for 2022. Or do I have to pay it over immediately to Revenue in Jan 2022?

Thanks

Pawwed Rig

Are you taking salary or a dividend? I assume salary as a dividend would make no sense.

If you take the cash as salary why would it not go through payroll? The tax would be due in the next payroll run.

If it is a dividend then you need to file a DWT rtn next month paying 25% tax with the balance due in your form 11.

It MIGHT make more sense to take half in Dec and half in Jan depending on your over all tax position.

Guaranteed to be better ways of extracting this cash btw

businessdit

https://www.boards.ie/discussion/comment/118349492#Comment_118349492

thanks for the reply.

Well I currently do take a salary (40k per year) (monthly payroll.)

So if I take a dividend instead - you reckon I would only pay 25% of the liability and then the rest in October 2023?

That could work...

I agree ... there are probably 100 better ways to do this... but I need a lump sum of money personally in Q1 2022.

can you not use some sort of directors loan or something?

businessdit

https://www.boards.ie/discussion/comment/118349661#Comment_118349661

thanks - unfortunately not as far as I can see

Under company law it is illegal for a company to loan more than 10% of its net assets to their directors.

This 200k I am withdrawing is basically all of the money left in the company.

neil_hosey

Strongly suggest you talk to an accountant..

You could do a members voluntary liquidation. You could be paying 33 pc capital gains instead of 50pc income tax.

How long is the company existing? Longer than 3 years? Are you the sole director? cgt entrepreneurs relief may apply

Either way don't listen to random muppets on the Internet, for that amount of money get proper advice from a professional.

Bigus

You need to talk to an accountant, as far as the Irish revenue are concerned LTD liability doesn't exist anymore ,on a personal level

so thread carefully.

Very strong criminal law now in regard to company operations in company’s office,and rightly so after decades of abuse , not like back in the old days , even with no obvious liabilities, it’s the company’s money not yours , and has to be very carefully treated as such , a bit like you wouldn’t take money willy nilly out of your granny’s joint bank account before the will was through probate and distributed.

businessdit

https://www.boards.ie/discussion/comment/118349707#Comment_118349707

Thanks

Well... the company is still very viable and provides me with my income... so I don't necessarily want to liquidate it.

Liquidating would be a lot of hassle... and entrepreneurs relief would mean i could not just start up again afaik.

Yes, it is in existence more than 3 years.

Yes, I do intend to talk to my accountant.

businessdit

https://www.boards.ie/discussion/comment/118349771#Comment_118349771

Yes - I agree and do intend to talk to my accountant.

Just trying to get an idea of my options... ultimately I will pay a lot of tax.

Thanks

Pawwed Rig

https://www.boards.ie/discussion/comment/118349652#Comment_118349652

Well yes but you cannot get a CT deduction for a dividend so would be a silly idea that would cost 25k more than salary. For that money a personal bank loan for 100k would be a smarter option. A salary would presumably create a loss within the company that would mean the company would save on CT in future years.

You may not even be allowed make a distribution as it will depend on the distributable reserves of the company.