Company reserve account

[123newbie]

Hi All
Over the last few years I have built up a relatively large company reserve, in excess of 6 figures. My original plan was to eventually drip feed this out of the company in Dividends when I am no longer working.

I have a couple of questions:
1) Is this good practice?
2) Does having a large reserve attract attention from HMR&C?

Any recommendations much appreciated.
Thanks
Newbie

[Craig@Clarity]

Firstly to answer your questions:

1. Depends on your circumstance but certainly nothing wrong with what you are doing.
2. There's no evidence of this.

Have you thought about whether you should close your company if you are not contracting and perhaps distribute the reserves as capital and perhaps take advantage of Entrepreneurs Relief? Of course, if you're still using your company, perhaps look at investing it?

[xchaotic]

Interesting thing about dissolving your Ltd is of course you lose all the history, some people claim that a respectable company that runs for years is an asset in itself.
I wonder if it's possible to create a second company and do services for it, and dissolve that one instead, so that should you wish to return to contracting you still have a company that has survived two major recessions?

[123newbie]

Firstly to answer your questions:

1. Depends on your circumstance but certainly nothing wrong with what you are doing.
2. There's no evidence of this.

Have you thought about whether you should close your company if you are not contracting and perhaps distribute the reserves as capital and perhaps take advantage of Entrepreneurs Relief? Of course, if you're still using your company, perhaps look at investing it?

Thanks Craig

I have a few years left before I decide to retire and currently in contract. My year end accounts have just been completed so was curious whether when submitted due to the cash in reserve this could trigger an audit.

Also you never know what is around the corner so don't want to tie up a lot of it in an investment, feel more comfortable if is is readily available. However I may regret this as its not earning any interest at the moment.

[malvolio]

Thanks Craig

I have a few years left before I decide to retire and currently in contract. My year end accounts have just been completed so was curious whether when submitted due to the cash in reserve this could trigger an audit.

Also you never know what is around the corner so don't want to tie up a lot of it in an investment, feel more comfortable if is is readily available. However I may regret this as its not earning any interest at the moment.

IF' you're old enough (50 plus??) think about SIPPing it. Take a (big) chunk, 75% into a SIPP (or some other ring-feenced pension fund of your choice - speak to a real IFA), 25% tax free into your personal account. You also pay no personal tax on the SIPPed monies (you will on any interest they earn, of course) and you get to take it off your CT bill.

Of course, if you're merely a whipper-snapper, that may not be an option. But it's a thought...