½Û×ÓÊÓƵ

Effective profit extraction ― overview

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance

Effective profit extraction ― overview

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance
imgtext

Extraction of companies’ profits will result in a tax charge and often national insurance contributions (NIC) being levied. Careful planning is crucial. This is generally a complicated exercise as there are many different factors to consider. As well as considering the tax impact of the chosen profit extraction strategy, it is important not to lose sight of the commercial, legal or long-term implications.

Background

Profits within a company will be taxed under corporation tax. Once profits are extracted, they are subject to taxation again in the hands of the individual owner. The rate and timing of the tax / NIC liability depends on the chosen method of profit extraction.

For further guidance on the calculation of corporation tax, see the Computation of corporation tax guidance note.

Summary of profit extraction options

There are a number of methods for an owner of a company to extract profit. These can be regarded as primarily falling into two categories: capital and income. These will often result in capital gains tax or income tax consequences, and the choice of

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, and tax research, register for a free trial of Tolley+â„¢
Powered by

Popular Articles

Special rate pool and long life assets

Special rate pool and long life assetsSpecial rate poolExpenditure on some types of plant or machinery must, if neither annual investment allowance (AIA) nor first year allowances (FYAs) are available, be allocated to a ‘special rate pool’. Expenditure to be allocated to the special rate pool

14 Jul 2020 13:41 | Produced by Tolley Read more Read more

Self assessment ― amendments and corrections

Self assessment ― amendments and correctionsOnce a self assessment tax return has been filed, both HMRC and the taxpayer (or the agent) has the right to make changes to the return. There are different time limits depending on whether it is a correction by HMRC or an amendment made by the

14 Jul 2020 13:37 | Produced by Tolley Read more Read more

Short-term business visitors (STBVs)

Short-term business visitors (STBVs)What is a short-term business visitor?An STBV for UK tax purposes is an individual who performs duties for a non-UK employer and as a part of those duties has been asked to spend a short period working in the UK. There is a common misconception that there is

14 Jul 2020 13:40 | Produced by Tolley in association with Gill Salmons Read more Read more