Summary. We advise on a profit taking strategy for company owners, focusing on tax-efficient equity withdrawal. This includes considering balance sheet impacts, shareholder tax consequences, and options like share buybacks or capital repayment, requiring careful navigation of company law and potential HMRC clearance.
Here, we offer a profit taking strategy to enable you to withdraw accumulated capital from your company, tax efficiently.
Corporate Capital Repayment
If you’re an unincorporated business such as a sole trader or partnership you are able to withdraw equity very easily. As you have already paid tax on the accumulated profits, there are no further tax consequences. However, the same can’t be said for owners equity, if you are an owner manager of a company. You will be impacted by both company and tax law.
Can you take cash?
When taking equity capital from your company, other than by paying a dividend, you should take into consideration the following three things for owners withdrawal:
- The balance sheet must remain positive following the transaction.
- The company must either have enough cash or be able to raise it through borrowing.
- Shareholders will face tax consequences.
Realising Share Capital
Any accumulated capital will be represented in the value of company shares. If you do not intend on selling any your shares you have two options:
- The company can buy some of its shares from you
- The company can repay some of the share capital.
However, you must take into consideration that where a reduction of the share capital is made, it must be for all shares of the same class. So if you want to repay capital to only one shareholder or just a few shareholders, this isn’t an option. On the plus side, there can be more tax advantages.
If you’re unsure on how to proceed with your profit extraction, then consult our expert team here at Thomas Nock Martin. They can help provide insights on a profit taking strategy. We can help you understand the company law and tax consequences before you move forward with a share transaction.
Most share transactions require special clearance from HMRC. Our business tax services can help you find the most tax efficient way for your situation.
Thomas Nock Martin | Profit Taking Strategy
We are specialists in profit taking strategy which means we can offer the right guidance for your circumstance. If you’re looking for ‘accounting near me’ then call us today on 01384 261300. Alternatively, you can visit our website for more information. Let us help your business.
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