One of the biggest problems many of our clients ask us to help them resolve is the burden of success….

All successful business owners know that the price of making too much profit is an eye-watering Corporation Tax bill. How to reduce your Corporation Tax liability without impacting liquidity or other impact, seems almost impossible.

It is a tax upon your hard work and success and can feel like an unmanageable dilemma!

TLPI can work with you to understand your exact situation, address pain points and resolve goals. Our consultants are experienced in strategic tax planning for enhanced cashflow and reduced Corporation Tax. The process is straightforward as TLPI does the heavy lifting to ensure the plan is HMRC compliant, robust, and easy to manage for your ongoing success.

The plan can consist of one, or both, of the following products:

The Small Self-Administered Scheme (SSAS)

and

the Family Investment Company (FIC)

1 – The essential product required for bringing down the balance sheet is the SSAS.

A SSAS is a business pension scheme, exclusively available to company directors. It allows business owners like you to take control of your own pension funds, all within the rules of HMRC and The Pensions Regulator (TPR), and invest them at your own discretion. You can read more about the SSAS by clicking here

So how does the SSAS help maintain company cash flow?

The key element here is the SSAS Loanback. This is a facility unique to this sophisticated pension type which allows you to loan up to 50% of your pension to your trading company, for any business purpose. Immediately, the cash flow issue is solved! Cash, assets, and pension contributions can be paid into the SSAS, reducing the balance sheet, providing investment funds and securing assets, BUT funds still remain available to the company via the unique SSAS pension loanback facility,

Loans from your pension to your company must be paid back within five years. You can set your own interest rate on the loan, as long as it is at least 1% above the high-street base rate. The trick here is to set a higher interest rate, meaning that your payments from the business are increased, further reducing the company balance sheet, whilst increasing your pension pot at the same time. In addition, this is the repayment of a business loan and is thus classed as a business expense!

Using a SSAS, clever solutions can be created to increase growth both in the business and the pension fund. In turn, this unlocks a myriad of investment opportunities that would have otherwise been closed to you.

Another great benefit of a SSAS pension is that, unlike other pension schemes, it is allowed to invest in property, all within HMRC rules. There are so many options and strategies open to you via the SSAS.

Example 1: your SSAS could purchase your business premises! Why?

The company then pays rent to your SSAS –

• An allowed business expense
• Reduced year-end balance sheet
• Rental income received by the SSAS is NOT LIABLE for income tax
• Capital gains on the value of the premises, if sold, are not liable for Capital Gains Tax
• The property is ring-fenced in the SSAS, outside of your estate, for Inheritance Tax purposes
• The pension pot grows, giving you an even bigger pot for retirement, further investment or loanback to the business
• You become your own landlord
• Admin and legal fees are reduced
• Premises are safe within the ring-fenced wrapper of the SSAS, keeping them safe from IHT.

You can read more about SSAS investments and the extensive benefits it offers by clicking here.

Whilst the SSAS is an amazing asset for any business owner on its own, there is further opportunity to save tax and protect wealth by also implementing and integrating a second product, the Family Investment Company.

2 – A Family Investment Company is a tax efficient product which allows you to:

• remove risk of losing Business Property relief if you retain or invest excess profit
• invest surplus company cash without subjecting your trading company to tax penalty
• reduce the Inheritance Tax liability your family would face should the worst happen
• create an investment property portfolio to grow the pot
• Improve cash-flow across your business

Example 2: You wish to build Buy-to-Let property portfolio, using surplus company cash:

Retained profit from the company is transferred into the Family Investment Company and used to purchase a number of buy-to-let properties

• the trading company avoids a 40% tax penalty, for being deemed an investment company by HMRC
• the buy-to-let property is ring-fenced inside the FIC, and outside of the estate so safe from creditors
• Assets of the FIC are protected from a 40% Inheritance Tax bill, should the worst happen to you
• nominated beneficiaries are part of the Family Investment Company
• passing on the the portfolio when you die, is already structured
• you maintain full control of both the trading and the Family Investment Company
• dividends can be taken, and loans made to and from the FIC
• funds can be moved freely between companies and, should you have one, your SSAS pension
• rental income from your buy-to-let portfolio sits within the Family Investment Company

By coupling the Family Investment Company with the Small Self-Administered Scheme, you are creating a financial triangle that gives you extreme flexibility over your total financial situation. By elevating your tax plan in this way, funds can be moved between the company, the FIC, and the SSAS, providing the greatest tax savings and the most profitable investments.

The FIC may take advantage of various tax reliefs, allowances, and benefits available to companies generally. The FIC and the trading company could be eligible for capital allowances, for example on investments in machinery, research, and development (R&D), or other business reliefs. Tax planning implements the understanding of these and utilises them via the FIC, within HMRC rules, to reduce its taxable profits and, in turn, corporation tax liability.

You can read more about the Family Investment Company by clicking here.