New Business Question

numberone

I have recently started my own business, as an incentive to employees I would like to offer a profit of up to 50% for items sold BUT 20% MUST be invested witha financial entity of my choice (kinda like an investment club?) or offer a 401K option of which 20% of profit must be invested (the only thing about this option I don't know how I would benefit) how do you do this and whom do I need to contact?
TIA

democrates

Tax advisor for definite.
Ask them about ssap (small self-administered pension), this can be stupendously tax efficient, as I understand it, if you put in say 50k you can leverage this up with a mortgage to build a buy-to-let portfolio on which you pay no tax on the rent or cgt on disposal. Throw in a fat guy and call it christmas. Only thing is it's reserved for directors with at least 5% of equity in the company, and you can't cash it in until age 65. Still, could form part of your strategy.
But talk to a good tax advisor, best money you ever spent.

numberone

democrates wrote:

Tax advisor for definite.
Ask them about ssap (small self-administered pension), this can be stupendously tax efficient, as I understand it, if you put in say 50k you can leverage this up with a mortgage to build a buy-to-let portfolio on which you pay no tax on the rent or cgt on disposal. Throw in a fat guy and call it christmas. Only thing is it's reserved for directors with at least 5% of equity in the company, and you can't cash it in until age 65. Still, could form part of your strategy.
But talk to a good tax advisor, best money you ever spent.

WOW thanks! But why can't I withdraw until I am 65? I am the 100% owner of the company. How does this benefit my employees?

ck1

You can actually retire any time from age 50 from a SSAP however if you are a shareholder in the company your must sell your shares in the company. Additionally, SSAPs are not restricted to Company Directors only. However if you wish to encash your pensions benefits into cash rather than an annuity route you must be a shareholder with 5% holdings or above.

There are quite a few restrictions like, cannot self-invest, Property must be arm-length, cannot invest in collectable goods - like stamps, wine however this has just been opened up in the UK so maybe in the future here we will see stamps, fine arts, etc in ssaps here in Ireland.

Another point to bear in mind, if you set up any other occupational/executive pension scheme, you must take all of them together unlike personal pensions whereby you can stagger your retirement.

ck1

Just to clarify one point in my previous point that on reading was not too clear. Shareholding must only be relinquished on early retirement if prior to age 60.

village49

Why do you have to sell the shares on retiring?

ck1

Was only really introducted here in the mid '80 for two reasons I gather. First, a number of business owners were encashing their pensions and investing the proceeds into failing companies. The other was to ensure that Occupational rules were not abused.

The restriction only applies to 20% shareholders and above. There are also many other restriction for 20% shareholders under Occupational Pensions, for example, they can only use one defination of final salary whereby an employee has three options for calculation of final salary. It really is to try and stop abuse by persons in control.

ck1

Just as a point of reference for SSAP's and lending within them, leglisation has recently been passed which limits borrowings to Single Member Schemes only.

democrates

Can one company have a number of single-member schemes or is it one single-member scheme per company?

ck1

Yes, there is no problem setting up multiple single member schemes, the rules regarding borrowing now restricts it (from 23rd Sept) to plans where the scheme rules limit membership to one member.