Using the reserves

22 May 2012

Issue: 4354 / Categories: Forum & Feedback , Capital Gains

Companies that have cash reserves will be keen to invest these to obtain better returns, but this may prejudice the entrepreneurs’ relief available to shareholders

It seems clear from the responses to the recent query Surplus reserves that the company is making a loan to the director/shareholder and will be caught by the loans to participators’ provisions of CTA 2010.

To avoid being caught by these provisions it may be sensible to consider alternative use of the surplus cash in the company by possibly investing these funds – for example in shares or investment property – and getting a better return.

We appreciate that this will have an impact on capital gains tax entrepreneurs’ relief in the future and would be grateful if readers could outline the ramifications of this and also the steps that could possibly be taken to mitigate or reduce the impact prior to the disposal or liquidation of the company.

Query 17 995 – A.T.

Reply from TQ1

As A.T. suggests using surplus profits...

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