Postby tangent » Fri Jun 11, 2010 7:42 pm
Not taper relief, but something similar - Indexation Relief. This can be used to adjust the purchase price of an asset for inflation. Corporation tax is only paid on inflation adjusted increases in value.
The reason for doing this is tax efficiency. The company receives dividends that do not attract corporation tax. These can be accessed tax free by reducing the Director's Loan. Once the Director's Loan has been repaid (We are talking 10+ years here), remaining assets can be withdrawn as dividends, which would only attract additional tax for higher rate tax payers. I would hope to be in retirement by this stage and would arrange my finances so I was not a higher rate tax payer. Unlike a SIPP, I have complete control over the assets. I can chose to sell shares (and take a possible CT hit), give away shares in the investment company itself or pass it on to heirs, which may be subject to IHT of course. If I invest directly in shares, at present I would end up paying additional income tax on the dividends.
Running a company is not difficult - I already do that. This sort of company would not need to mess about with VAT or PAYE either.
I already have a SIPP and pay the maximum I can into ISAs. SIPPs are not as flexible as this investment company approach and are likely to become tax inefficient for higher rate tax payers after the next budget.