As per another one of my threads I may be looking at creating a partnership and a Ltd company.

Basically I would like to withdraw some of my invested capital out of the business.

My question is, can I be taxed on my withdrawn amount if I can show that it has been invested as capital.

If so, is there a smart way of going about this?

Kind regards,

John
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As per another one of my threads I may be looking at creating a partnership and a Ltd company.

Basically I would like to withdraw some of my invested capital out of the business.

My question is, can I be taxed on my withdrawn amount if I can show that it has been invested as capital.

If so, is there a smart way of going about this?

Kind regards,

John

The smart way is to speak to your accountant :)

In general terms, if it has been invested as a director's loan, you may withdraw any remaining balance without any tax implications
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I agree with Bob talk to your accountant he will be best placed to advise you, as you certainly do not give nearly enough information on here to comment.

Jason
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As per another one of my threads I may be looking at creating a partnership and a Ltd company.

Basically I would like to withdraw some of my invested capital out of the business.

My question is, can I be taxed on my withdrawn amount if I can show that it has been invested as capital.

If so, is there a smart way of going about this?

Kind regards,

John

Confused - If you are creating the business why are you withdrawing the capital? :|
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Capital invested in a business may be withdeawn without attracting a tax liability provided the money withdrawn is a straight transfer of funds not involving any profit element. Although the way the money was invested may be declarable such as a share investment but would not be taxable if no profit was made.

If you have invested in an unlimited partnership then that investment is a personal transaction and withdrawal of the funds is not taxed.

If you have invested in a self employment business then that investment is a personal transaction and withdrawal of the funds is not taxed.

If you have invested in a limited company as a directors loan then that investment is a personal transaction and withdrawal of the loan is not taxed.

If you have invested in a limited company by buying shares then that is an investment, decalarable and would be taxable on any profit obtained.
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Terry - hope you do not mind mean saying but do you mean:

If you have invested in a limited company by buying shares then that is an investment, decalarable and would be taxable on any dividend obtained.
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Elaine,
No didn't mean or mention dividend.
I did mention the word profit and was refering to a profit on the difference between the cost and sale proceeds of the equity.
We don't know the way the capital to be withdrawn was invested and so a potential scenario of having bought shares in a limited company which are then sold at a profit would be subject to capital gains tax.
Does that clear it up?
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Thank you for all of your replies.

I do not use an accountant presently so am on the prowl for some free advice!

I realise my intial post was a little void of information so I will add some more in.

Presently self employed as a sole trader so not a limited company.

I would be looking to withdraw *some* of my initial invested capital before changing my status to a limited company.

From Terry's reply it would seem that it was not taxable but I am a little confused how it relates to the profit. If the business is making profit then is there a way of separating what you withdraw as invested capital and what you withdraw as profit?

Maybe I should get myself an accountant!

Kind regards,

John
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The profit you make in the business is taxable.

If you have loaned the business money then you are able to withdraw these funds back to your personal account and you will not be taxed on this as income.

You should speak to an accountant to prepare a balance sheet for your company. This will show how much the company has as "capital introduced".
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John,

As you are self employed then you can withdraw money from the business and it is not taaxable as withdrawals from a self employed business are personal decisions and not a taxable expense.

Income tax and national insurance are calculated on the net taxable profit and capital input or withdrawals do not affect the tax as your withdrawal is not wages but a personal decision.
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Thanks for the clarification, it makes perfect sense apart from...

All profit is taxable, whether it is withdrawn or not from the businss (if you are self-employed).

The capital was put into the business, and naturally you are only going to withdraw this capital when the business is running at a profit and has enough money in the bank to do so, so in effect you are getting taxed on your capital as there is no way of getting it back out of the business unless you take it out before it makes a profit.

Then again maybe I am just missing something.

I really should talk to an accountant as it may save me a load of money changing the business to Ltd and then taking it out as a directors loan.

Kind regards,

John
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You are right John, time to talk to an accountant.

Jason
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Drawings out of a self employed business have nothing to do with the taxable profit.

Taxable profit is calculated by deducting the business expenses from the business income.

Drawings from a self employed business are not wages and not business expenses and have no part in the calculation of the tax liability.
Drawings from a self employed business is a personal decision.

If the drawings cause the self employed business to be liquidated due to lack of funds then that self employed person is still liable to pay the creditors as they always were since liability is unlimited and the personal creditors of a business are always personal debts of the owner.
Tax is not involved as that is also a personal debt based upon the net taxable profit.

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