Conor Murray • 29 Nov 2018
31st December 2018 – An important date for company owners!
There is nothing quite like a deadline to get something done! Whilst most people associate the 31st October each year as an important date (and it is!) if you’re a company owner with a financial year-end date of 31st December 2018 - you need to take note!
95% of all limited companies in Ireland operate their financial year like the calendar year therefore having a business year-end date of 31st December. An important aspect of planning for the future can be to identify funds in your business that may be surplus to what you currently need to finance your business today and to move these funds out of the business.
If you are a company owner, director or senior executive of a company you undoubtedly have an extremely demanding work life. You work today to ensure you can enjoy tomorrow and you want to have the financial provisions in place to do just that.
A tax efficient way of achieving this is to set up a company pension plan, arranging for your company to make a contribution to this arrangement before 31st December each year. In essence you are moving money from the company balance sheet into your name in a tax efficient manner. This money is held in trust until retirement age and the company receives corporation tax relief at 12.5% against its corporation tax liability.
Unlike a sole trader or employee in non-pensionable employment, a company does not have the flexibility to backdate pension contributions following completion of a company year-end. In order to qualify for corporation tax relief a payment by the company to a pension plan on behalf of an executive or director must be made on or before the company year-end date. The tax calculations for a sole trader are different in that such an individual can backdate a pension contribution made in November ’18 to help reduce their tax liability for 2017. Such flexibility is not available to a limited company structure.
The extent of pension tax relief currently available to limited company business owners is significant. In many cases it is more tax efficient for a business owner to put a portion of their company profits into a pension plan than to give themselves a pay rise. An executive or company pension plan is established under trust and is designed to build up a fund to allow a company provide retirement benefits for a director or executive.
The following are some of the benefits of retirement planning through your company;
1. Contributions made by the company to the plan can be offset against corporation tax
2. There are no benefit in kind (BIK) implications for the employee/director
3. All investment gains are tax-free
4. Tax-free cash at retirement subject to revenue limits
5. Possibility of early retirement from age 50
6. Employee contributions are tax deductible at source
If you decide to set up an executive pension plan it is important to ensure your pension contributions are invested in funds with the potential for growth whilst taking account of your attitude to investment risk. We at CMCC Financial Solutions work with all pension providers in Ireland and have access to a vast array of global and domestic investment funds for you to invest in. We can offer advice on how investment funds are performing and what funds best suit your attitude to investment risk.
Contact us here in Sandyford on 01 6532260 or at firstname.lastname@example.org to make an appointment in order to establish how important the 31st December 2018 could be to you and your company.
28th November 2018