Nick and Yousef are directors and equal shareholders in Turkish Magic Carpets Ltd, an importer of antique rugs and carpets. They have been trading for 3 years and their profit is expected to be £250,000 after directors’ remuneration.
Nick and Yousef met with their accountant, Helen, to discuss their long-term aims of tax efficient financial security whilst also wanting to retain cash within the business to fund further expansion and not starve the company of its trading capital.
Nick and Yousef have pensions from previous employments but haven’t paid into them for many years.
Helen suggested they consider establishing a SSAS for Turkish Magic Carpets and pay an initial contribution of £250,000. This would reduce their corporation tax and the SSAS could then make a loan back to Magic Carpets.
Nick and Yousef were delighted to receive a pension contribution and reduce their corporation tax bill – and by paying the contribution to a SSAS they could lend up to £125,000 back to Magic Carpets at any time and continue the expansion of the business.