Tax Restructuring for limited companies.
Restructuring tax can mean many things for a limited company.
A very simple example of tax restructuring is an example of a sole trader incorporating to form a limited company.
A sole trader with a good business but is earning a lot of taxable income.
Even if they are reinvesting the profits back into the business they might not get the tax relief for these investments.
So forming a limited company might be quite effective for greatly reducing the amount of tax the business pays to HMRC.
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You only pay personal income tax as an individual/shareholder on the money you draw out by way of dividends and wages.
Whereas as a sole trader you get assessed to personal income tax on all the net profit of the business.
As a limited company you could have a net profit of a million pounds with a limited company, you only pay corporation tax and 19% on that profit, whereas as a sole trader you could be paying 45% on the majority of that million pounds net profit.
So it’s quite effective and sometimes essential from a cashflow and tax planning point of view to restructure your businesses.
There are certain tax matters to consider when forming a company.
Additionally if you have lots of debts you can restructure their position.
Read about terminal loss relief.
With tax, you have to strategise in the real time and for the future. With tax as with everything else, you cannot change the past.