A tax-efficient way to take money out of your limited company

Employer pension contributions are a good way to take money out of a company tax-free. The directors or employees will get the benefits (eventually!) and the contributions are deemed as tax deductible expenses, thereby decreasing corporation tax payable by the company.

There is however, an alternative available if the company owns freehold or long leasehold premises.

Directors can use the employer pension contributions to buy part or all of the company’s trading premises. The pension company can then lease the premises to the company at a market rate rent. The rent will be a tax deductible expense for the company and the pension fund doesn’t have to pay tax on the rent received.

There will be corporation tax payable if the premises has increased in value since the company purchased it. But remember that the pension contributions paid by the company to purchase the property are tax deductible expenses so you are still likely to be better off.

It is worth seeking the advice of a financial advisor if you think this applies to you. Contact us today and we can put you in touch with the right people.