Does your company have cash on deposit or retained earnings within the business? As deposit rates continue to fall, some companies are looking for the potential to make a better return and to optimise their tax position. There are a number of benefits for companies who wish to invest through a life assurance policy versus investing directly in an asset or keeping funds on deposit. Many of our corporate clients have established life assurance investment bonds, to diversify their company investment portfolios and to benefit from the potential tax advantages associated with these investments.
The gross roll up tax regime applies to such policies. This means all income and gains within the policy are accumulated gross, with a deemed exit tax charge applied on any gain accumulated only on each 8th anniversary or deducted from any gain realised on withdrawal or maturity. Exit tax for company investments is charged at 25%. Corporation tax on non-trading income is also charged at the same rate, however, company investments through a life assurance bond are exempt from the close company surcharge. This may be payable on income from direct investments such as property, deposits or individual shares, at an additional 20% if it is undistributed within 18 months of the accounting period that it arose.
Investing in a life assurance investment bond need not increase your reporting and administrative workload, as the life office is responsible for the deduction and payment of exit tax with the balance paid to the investor. It also provides the flexibility to invest on a regular or monthly basis that investing in an asset, such as property, does not allow. If your company is performing well, this will provide you with options for your retained profit.
While we would recommend that you seek advice from your tax advisers in relation to making a corporate investment, particularly in relation to whether the close company surcharge will apply to your company, there is potential to utilise surplus cash in a tax efficient manner and seek out investment returns currently not available from deposits.
We would welcome the opportunity to discuss this with you in greater detail. If you require further information, contact Metis Ireland on 061-518365.
Pension and Investment Consultant
Metis Ireland Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland. All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified independent financial adviser before entering any financial contract. Metis Ireland Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.