INVESTMENTS

MANAGING SURPLUS CASH HELD IN A BUSINESS

Dominique Butters Executive Business Development Manager Blackfinch Investments

Do you have business-owning clients with surplus cash in their company , or do you work with accountants who may have these clients ? If so , this article will be of particular use . Having a healthy bank balance is nirvana for companies , but could that nirvana turn into a nightmare for them ? There are many reasons why business owners keep large sums of surplus cash in their business . It may give them peace of mind should the company hit trouble in future , or it could provide the business with a ‘ war chest ’ to fund potential expansion opportunities , such as buying additional premises or to acquire another business . These are the most common reasons I hear for companies keeping high levels of cash on their balance sheet . However , this can cause potential issues down the line . For example , keeping too much cash in the company that is not used in the day-to-day running of the business could mean the company loses its trading status , and mean it is deemed by HMRC as an investment company . Should that happen , the shareholders risk losing Business Asset Disposal Relief ( BADR ), formerly known as Entrepreneur ’ s Relief , when they sell the business , and could end up doubling their Capital Gains Tax bill !

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