Business owners – don’t get caught out

Inquisitive man holding tablet with glasses

Business owners, why do you need a Business Trust Fund?

By owning a successful business, making a profit can sometimes be a double-edged sword, especially when it comes to tax! The more profit you make, the more tax you pay. Fair enough some might say, but when using that profit also means you are hit with additional tax penalties and charges, surely it is time to look a bit more closely at what you are doing and the strategies you can put in place to optimise your tax efficiency?

The problem many company directors face is understanding tax, legalities and investment strategies. It takes knowledge, time, and a lot of careful planning. Yes, you can employ expensive accountants and IFA’s who will look at your financial situation, but the problem is, accountants and IFA’s are not entrepreneurs; they are not strategists or investment experts, and they are not innovative!

So, let’s look at the problem:

  • You make a profit, but sat in a bank account, most idle cash earns a meagre 0.1% interest – You do have other options!
  • Investing your profits in anything other than day-to-day trade renders you liable for a 40% surcharge on the profits that you accrue, even though you have already paid corporation tax on it – Did you know this?
  • Substantial surplus cash could be taxed simply just for holding it, if HMRC deem you have too much! – Has your accountant mentioned this?
  • Surplus company cash is subject to 40% IHT – We can reduce this to 0%!

Current situation

So, how do you invest company cash and avoid the IHT 40% tax charge?

The simple answer is that you must find a way to invest company cash within HMRC rules, and that solution presents itself in the form of a Business Trust Fund.

Solution

The foundation of a Business Trust Fund is a tax vehicle, setup in addition to your trading company, with a bank account from which you control your funds and decide how you want to invest them. Funds are transferred from your trading company to your Business Trust Fund and, as it is a trust, Company profits and surplus cash can be invested in property, stocks, and/or many other asset classes these funds can then be invested within HMRC regulations, ultimately mitigating your tax position. By doing so, you are creating the ultimate, tax efficient business solution to investing your profits, as well as creating the opportunity to reduce inheritance tax, protect your family wealth and plan succession, ring-fence business assets and create a lifetime and beyond legacy.

If you want to understand how a Business Trust Fund is recognised by HMRC, simply CLICK HERE to view HRMC legislation. The solution this tax advantage achieves is in accordance with legislation set out in the Inheritance Tax Act 1984, relating to business relief for inheritance tax. This, along with professional expert advice and setup from TLP means that there is a solution to avoiding that imminent tax levy on your company success.

The Business Trust fund is a package offered by TLP, including setting up your Business Trust Fund company and creating the necessary trusts and loan documentation, where required. As a Trust and Company formation provider, registered with HMRC, TLP ensure the process for you is simple and straightforward.

Explanatuion of the Business Trust Fund

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Della Paviour

Della Paviour

Della Paviour. Marketing Lead. TLP