Chris Thorpe explores some options available to owners who wish to extract profits out of their companies.
A company with a large amount of cash on the balance sheet is obviously a ‘good thing’ for the company’s owners. The only problem is how to get it out, and in a tax-efficient manner?
Is surplus cash a problem?
Before looking at that, it might be worth a quick reminder about why a large amount of cash on the balance sheet might be a problem. For capital gains tax (CGT) purposes, HMRC might regard the company as not being ‘substantially’ trading if the cash is deemed to be surplus to requirements of the business and represents more than 20% of the company’s value.
If this happens, HMRC may not deem the company to be ‘trading’ for the