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DAVID WHISCOMBE looks at how the benefits can be enjoyed
KEY POINTS
- Partnership business transferred to a company
- Commercial independence
- Selling the business
- Benign tax planning
Generating substantial profits as a sole trader can result in a considerable tax bill by the time account is taken both of the top income tax rate of 50% and National Insurance contributions.
It is a common fact that once maintainable profits reach a trigger level operating the business through a company is much more tax-efficient.
Quite where that trigger level lies and what savings are potentially available depends on several factors.
The maximum benefit will be seen where profits are retained as working capital within the business rather than drawn for consumption as incorporation will allow such capital to be funded out of income taxed at corporate rather than income tax rates.
However even...
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