When it comes to surplus money on your balance sheet, is cash always king?

If you want to give your company’s surplus money the potential to work harder than deposits, the potential to outperform inflation, now may be the right time to speak with us about Corporate Investment Bonds. When you do this, your company’s surplus money will be invested in a fund to match the risk profile that you are comfortable to take, meaning it will have good potential for growth, especially over the long-term.

We offer you access to a broad range of funds across the risk spectrum, asset classes and from a range of leading product providers and global fund managers.

Fund value of a €50,000 initial investment after 5 years to - 01 October 2021.
Net of annual management charge but gross of other changes and tax

Source: Longboat Analytics. The returns quoted include the reinvestment of net income, are net of trading costs and net of an annual management charges of 1% for the High Yield Equity Fund, Multi-Asset Fund Strategic, 0.5% for the Merrion Multi-Asset 70 Fund, 0.95% for the L&G Multi-Index Fund IV and L&G Multi-Index V Fund, 1.13% for the Stewardship Fund, and 0.75% for the Compass Cautious Fund. For details of the charges applicable on your fund selection contact your Financial Broker. Other insurance contract charges apply and as such the returns shown do not represent the returns on insurance contracts linked to these funds. Details of all charges for a particular product are available on request. Aviva risk rates its funds using the ESMA risk ratings scale from 1 to 7. 1 being the lowest risk and 7 being the highest.

  • Warning: Past performance is not a reliable guide to future performance.

  • Warning: The value of your investment may go down as well as up.

  • Warning: If you invest in this fund you may lose some or all of the money you invest.

  • Warning: This fund may be affected by changes in currency exchange rates.

The information on this page does not constitute investment advice. It does not take into account the investment objectives, financial position or needs of any particular investor. Before making an investment decision, you should consult suitably qualified and independent investment, taxation and regulatory advisors to discuss your specific situation and investment objectives. The investment strategies and risk profiles outlined in this document may not be suitable for your specific investment needs.

Why Corporate Investments?

Profit elements of any withdrawals from a Savings Plan and Investment Bond are subject to exit tax of 25% for companies. As the investment growth is only taxed on any withdrawal, any surrender, maturity, assignment, every eight years or on death, the investment growth isn’t reduced each year by tax.

This gives your company’s savings the potential to work hard and benefit from compounding.

The benefits of investing in a life assurance policy vs direct deposit

* Dividend Withholding Tax is not deducted on dividends paid by Irish resident companies to other Irish tax resident companies.

** Companies should consult with their own professional tax advisers to confirm that this view applies to them.

Important: Investment costs / charges must also be taken into account. In the case of life assurance bonds and savings: stamp duty, entry or exit charges and annual management fees need to be taken into account.

Life assurance policy vs direct deposit over six years

The example above assumes the company has invested in a single premium investment product. In the above example, €100,000 is the premium invested after the deduction of the 1% Life Assurance Levy and inclusive of other charges and deductions outset. The return assumed is 4% with a 1% annual management charge deduction. It assumes exit tax of 25% paid on full withdrawal at the end of the six year term.

These figures are examples only and do not represent the experience of any investor. How much return you make will depend on how your investments perform and may be higher or lower than shown here. Deposit example: 1% is illustrative six year fixed rate return only. The example assumes that interest is added monthly and corporation tax and close company surcharge are applied annually.

Both examples assume that interest rates, exit tax and corporate tax ranges and closed company surcharge rules and rates remain unchanged for the period.

WARNING: These figures are estimates only. They are not a reliable guide to the future performance of this investment.

What are ‘Close’ Companies?

Most Irish resident companies are ‘close’ companies; a company that is controlled by five or fewer participators or is controlled by any number of participator who are directors.

So the close company surcharge on undistributed investment & estate income should not apply. Close company deposit interest subject to close company surcharge tax

Close companies face a potential 20% surcharge if investment and estate income is not distributed within 18 months after the end of accounting period. Close “service” companies are also liable for a surcharge of 15% on one-half of their undistributed trading income. The effective tax rate for Close companies facing both corporation tax and close company surcharge tax on their undistributed deposit interest equates to 40%

You may not want to extract cash from your company today for lots of reasons. However if your company does make a return on its money it may be faced with paying 25% corporation tax and the additional 20% close company surcharge on undistributed investment income**.

For these companies investing via a life policy offers an added advantage;

Withdrawal of monies from the bond including gain is exempt from the close company surcharge on investment and estate income*** The return on the bond would not be treated as income in the company accounts. The reasons we see companies invest in life investment policies: Potential for higher returns than deposits benefit from gross roll up – exit tax at a rate of 25% for companies is only applied on the gain on the policy withdrawal, assignment or every 8 years. So the company gets the cumulative benefit of growth.

The insurance provider is responsible for calculating and paying the exit tax. The exit tax is the final liability to tax for the investor. If your company’s attitude to investment risk changes – it can switch easily between the investment funds linked to the life investment policy without triggering any tax or having to reflect it in the accounts Life investment policies can offer the potential both to make a better return and to optimise you company’s tax position.

A ‘close’ company is a company that is controlled by five or fewer participants.

These companies may be subject to a surcharge tax each year on any investment or deposit income that remains undistributed after 18 months.

What this means is that a company could potentially have to pay a lot of tax on the interest from their deposit account – corporation tax (25%) and potentially close company surcharge (20%).

The taxation of insured savings policies is different – currently the only tax levied is the life assurance levy (1% of each contribution paid) and exit tax (25% for companies).

We will be happy to discuss these options with you at any time, please contact John on 087 2506365

** Companies should consult with their own professional tax advisers to confirm this view applies to them.

***As advised by External Tax Advisers. This is based on the view that the return on the bond is not treated as income in the company accounts.

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