Any Advice for investing company profits

[shelby68]

I will be making a tidy profit this year on my LTD Co. and am looking for the most tax efficient way to invest the profits.

Is there a way I can keep the money within the company as invested assets or am I better off just taking it up the rear and paying the tax up front as a dividend?

All ideas on a post card please.....

[lukemg]

With one month left before this year's tax-free allowances for individual savings accounts (Isas) and pensions expire, extreme stock market volatility has rattled many investors. Ian Cowie, Personal Finance Editor, sets out to answer their questions

Q: Why would anyone dream of investing when stock markets are in turmoil?

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A: Because the first step to making a profit is to buy low. The FTSE 100 is about 400 points lower at the time of writing than it was at the start of this month, which means it is 5pc cheaper than it was then. But stock market shocks are likely to continue for some time and shares could go lower.

Q: What's wrong with taking a 'wait and see approach' and doing nothing for now?

A: Unfortunately, pension and Isa allowances are tied to the tax year - which ends on April 5 and starts on April 6. These allow savers and investors to place up to a fixed limit in these tax shelters but they are annual limits and so it really is a case of use them or lose them. You cannot go back and subsequently utilise earlier tax years' pension or Isa allowances.

Q: How much are we talking about here?

A: Every adult can put up to £7,000 in a stock market Isa each tax year. So couples could shelter up to £28,000 between now mid-April by both making use of both tax years' allowances. Everyone is allowed to gain tax relief equivalent to their top rate of income tax on pension contributions equal to 100pc of their annual income or £215,000, whichever is lower.

Q: Do I have to take risks to get into these tax shelters?

A: No. You can gain tax relief on pension investments and direct the manager to hold this money in cash until you give further instructions. However, the maximum investment in a risk-free tax-free cash Isa is £3,000 per person per tax year.

Q: Why not sell all my shares now and buy back later after prices have fallen further?

A: Because timing markets is much more difficult than it looks. For example, Fidelity Investments - part of the largest unit trust company in the world - analysed what happened to £ 1,000 invested in the FTSE All Share index over 15 years to last month. If you remained fully invested during the whole period, your investment rolled up to about £ 4,400. But if you missed just the best three or four days each year by being out of the market for a total of 40 days during these 15 years, then your original £ 1,000 would be worth less than £ 1,200.

Q: When shares are so unpredictable, wouldn't it be better to avoid them altogether?

A: Yes, if you cannot afford the risk that you may get back less than you invested. No, if you are willing to accept some degree of risk in pursuit of higher returns. Despite their dramatic ups and downs, shares have a long track record of delivering higher returns than bonds or deposits over most periods of five years or more - which is one reason most pension funds hold most of their assets in shares.

Q: What are the probabilies of shares beating bonds and deposits over five years?

A: The best answer can be found in long-term investment analysis by Barclays Capital - a subsidiary of the high street bank. Its Equity Gilt Study 2007 examines returns from bank deposits, government bonds, and shares reflecting the broad composition of the London Stock Exchange since 1899. Over more than a century, shares beat bonds and deposits in three quarters of the periods of five consecutive years or more. Interestingly, for mothers and fathers choosing a home for Child Trust Funds where no cash can be withdrawn for 18 years, the probabilities of shares beating bonds and deposits over that period were respectively 91pc and 99pc.

Q: How about shorter terms of investment?

A: Less reassuringly, people who only remained invested for two consecutive years saw the probability of shares' outperformance fall to nearer two-in-three. In other words, over any couple of years, there was a one-in-three risk that equities would be a bad idea.

That underlines the fundamental point that shares and share-based funds are only suitable for people who can afford to remain invested for five years or more because shares' potential to deliver higher returns is matched by the risk that prices can fall without warning.

Q: What will share prices do next?

A: When it comes to stock market forecasts, there are only two types of expert; those who don't know and those who don't know they don't know. More helpfully for people who remain nervous about volatility, most unit and investment trust managers offer regular savings schemes which enable investors to reduce the risk of bad timing - or the possibility that prices may fall after you invest - by drip feeding modest amounts into shares each month.

[HankWangford]

I will be making a tidy profit this year on my LTD Co. and am looking for the most tax efficient way to invest the profits.

Is there a way I can keep the money within the company as invested assets or am I better off just taking it up the rear and paying the tax up front as a dividend?

All ideas on a post card please.....

donate to tony?

[shelby68]

donate to tony?

God damn it your a genius, he will need all the money he can get to pay his legal bills for Iraq once hes out of office, cheers , cheques on the way

http://forums.contractoruk.com/newre...eply&p=202046#
Moon

[threaded]

donate to tony?

And you could be made a Lord, allegedly.

[andy]

donate to tony?

Tony is history
Donate to Gordo, he is the future

[shelby68]

Tony is history
Donate to Gordo, he is the future

Maybe If we all slip him a tenner he will turn a blind eye to offshore companies and IR35 ....

[threaded]

Maybe If we all slip him a tenner he will turn a blind eye to offshore companies and IR35 ....

How do you suppose offshoring and IR35 came about in the first place?

There's lots of interesting stuff on that #10 email system...

When it all gets to charges it might be interesting for you lot to bung the prosecution brief to ask about it in the discovery stage.

[bobhope]

What are the odds that the email system will crash and all back-ups 'lost'?

[Hiram King Of Tyre]

I was wondering about this too. Allowing the Ltd Company to manage investments. Wouldn't this help to solve some of the IR35 issues by demonstrating that the business isn't only carrying out IT consultancy?

Also, divies could continue to be taken out alongside a pension once I stop contracting)

Am I talking bollx?