Holding too much cash and risk losing Entrepreneurs Relief?

Many companies can begin to build up a significant level of cash if the directors are reluctant to draw further sums given the level of Income Tax that dividends now attract. This can mean that the company either risks losing its trading status (and subsequently its Entrepreneurs Relief) or could find that it is disallowed on the capital within the company.

One way to offset this is to look at creating a lending company, either within or alongside the existing limited company.

Our preferred partners have private company experts who search for well-positioned businesses and carry out in-depth due diligence on each potential loan and negotiate attractive terms for our clients.

They will provide a flow of loans so the company can build a diverse lending book, typically offering a 7-10% per annum return, and some loans come with the benefit of a potential 40-50% bonus through share options.

As this is then considered a lending trade, the monies qualify for Entrepreneurs Relief, and ordinarily we would recommend that this is held in a separate limited company.

Important Information

The content of this webpage should not be construed as financial advice.

The benefit of tax relief depends on the individual circumstances and is assessed at the point a claim for relief is made.

Tax rules could change in the future and the availability of tax relief is not guaranteed.

Past performance is not necessarily a guide to future performance.