Company Cash Reserve

[harrison]

I am building up a cash 'reserve' in my LTD company. If I leave cash in the business and have my end of year accounts closed out, will the reserves be seen as profit and therefore be liable to tax (corporation tax) or can it sit there for a few years so that I can increase it for use as part of other business plans that I am reserving the cash for?

Appreciate any feedback.

Regards

[Craig@Clarity]

Hi Harrison,

It can just sit there and accumulate. It only gets taxed once under corporation tax. Once it's taxes, it sits as retained profit in the company.

[harrison]

Hi Thanks for your reply; so to be sure, I wont pay any corporation tax on the 'retained profit' unless I try to take it out of the business via salary or dividend.

Many Thanks

[Notascooby]

Hi Thanks for your reply; so to be sure, I wont pay any corporation tax on the 'retained profit' unless I try to take it out of the business via salary or dividend.

Many Thanks

Eeerm no, I suggest you read up a little or speak to an accountant before you get a nasty shock or do something silly.

[kingcook]

Hi Thanks for your reply; so to be sure, I wont pay any corporation tax on the 'retained profit' unless I try to take it out of the business via salary or dividend.

Many Thanks

As Craig said, you only pay corporation tax once.

If you decide not to pay a dividend in the future, instead drip feeding yourself a low salary, you will get corp tax relief as salary is classed as a business expense.

At least that's how i understand it.

[ASB]

Hi Thanks for your reply; so to be sure, I wont pay any corporation tax on the 'retained profit' unless I try to take it out of the business via salary or dividend.

Many Thanks

You will corporation tax on any interest it ears, that's just trading income. You won't pay any corporation on extracting it, but you personally may need to pay some income tax depending on your overall position and how it is extracted.

[Craig@Clarity]

Hi Thanks for your reply; so to be sure, I wont pay any corporation tax on the 'retained profit' unless I try to take it out of the business via salary or dividend.

Many Thanks

You won't pay any corporation tax on the 'retained profit'. If you take it out of the business via salary or dividend then the income you receive is subject to income tax.

[northernladuk]

Hi Thanks for your reply; so to be sure, I wont pay any corporation tax on the 'retained profit' unless I try to take it out of the business via salary or dividend.

Many Thanks

Ahh at least something to make us smile as the weekend starts....

Maybe a good time to point you to the new user guides to the right hand side and suggest you get the basics of your finances correct. You are responsible for your companies finances as a director so you need to know what is going on. Getting an account is going to get you out of a lot of trouble but even then you are still responsible. Read guides, get accountant, be safe.

[Notascooby]

Ahh at least something to make us smile as the weekend starts....

That was a lot gentler than I expected - must be the sunshine!

[Notascooby]

You won't pay any corporation tax on the 'retained profit'. If you take it out of the business via salary or dividend then the income you receive is subject to income tax.

Craig - I think the OP believes he will pay no tax AT ALL if the money remains in the company bank account and is only subject to CT once it is removed. Rather than understanding that VAT and CT will be due irrespective of what he does with the money and that withdrawing the money as salary or divs will alter the amount of income tax he pays in ADDITON to the CP and VAT.