Saturday, September 15, 2007

Business Tax Tip – Here’s a clever (and risky!) idea if you pay a lot of income tax

Invest £50,000 in a “Venture Capital Trust” – assuming you have paid enough tax, you will be able to claim 30% tax relief on the £50K.

Wait five years and make a contribution to your personal pension fund equal to the market value of the VCT investment at the time (let’s say it is still the same, at £50K). You will get tax relief at 40% on this. The fund uses the £50K to buy the VCT investment from you.

Your pension fund now has an investment worth £50K, and the cost to you has been:

Investment in VCT = £50K
Tax relief on VCT = (£15K)
Tax relief on pension = (£20K)
Net cost to you = £15K

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