AITI Chartered Tax Adviser

Transfer your business to a company

The key advantages of trading through a company:

  • Profits are taxed at 12.5% instead of over 50%: s 21.
  • You can pay your spouse/adult children as employees/directors.
  • The company can fund your pension.
  • The company may be able to claim a tax credit of 25% of R & D expenditure: s 766.

To extract profits tax-efficiently from the company, you can:

  • Liquidate the company.
  • Have the company buy back your shares and meet the relevant conditions: ss 173-186.
  • Sell assets (e.g., a personally held business premises) into the company. If this gives rise to a capital gain you may be able to shelter the gain by disposing of an asset with a loss in the same tax year.
  • See 6.
  • Pay tax at 25% on rental income: s 21A.