Case Studies

Case Study 1:

  • Manufacturer, aged 45, married with 2 kids
  • Sole Trader with profits circa €100,000
  • Business very solid but looking to build up property portfolio
  • Has 2 overseas Residential Investment Properties in Eastern Europe
  • Highly Geared
Issues:
  • Have released equity to maximum possible from PDH to purchase first RIP
  • Now funding second from short term debt
  • No pension funding
  • Drawing from business - all @ 47% tax
  • Wants to set up a LTD company but CGT an issue
Solution:
  • Incorporated
  • Sell trade worth circa €500,000 to the company
  • Company took out loan of €200,000 which pays client.
  • CGT Paid with balance set up as a Director’s loan
  • This creates an effective tax rate of 20% and will be paid to client on the drip tax-free
  • €30,000 over 10 years or when needed and suits the business
  • Second RIP funded and Short-term debt cleared
  • New salary of €50,000 with additional €30,000 from Directors loan tax-free
  • Started pension (V funding as a sole trader with max 25% or €25,000) within limited company with max circa 100% salary or €50,000
  • Now wishes to purchase a RIP through geared pension structure

Case Study 3:

  • Business owner, male aged 47, successful trading company in Dublin
  • Cash building in company
  • €150,000 to €200,000
  • Salary €70,000
  • Has existing pensions but piecemeal and unimpressed with stock market
Issues:
  • Tax
  • Pension performance
  • Lack of control
Solution:
  • Set up self administered trust - now has control
  • Used existing values to buy into 30% equity Geared Pension Fund and purchase a RIP
  • Increased salary to €100,000 so funding allowance
  • Moved €150,000 to cash to Small Self Administered Scheme
  • Will continue to fund €50,000 - €70,000 p.a. to pension
  • Has put €100,000 into equity portfolio stockbroker
  • Will grow this purchase by investing in more property in the future

Case Study 2:

  • Doctor – Aged 45, Married, 2 Kids
  • Sole Trader with profits of €150,000 - €200,000
  • Recently purchased a new home, purchase price €1 million - Loan of €750,000
  • Owns a practice premises on the High Street, prime location, value of €1+ million, which includes a small site with potential for an apartment, in own name with no borrowing.
Issues:
  • Very large homeloan
  • Not utilising significant commercial practice premises
  • Cannot pay self rent for property he owns
Solution:
  • Split portfolio between practice and site
  • Sold property to his wife for €700,000
  • No Capital Gains Tax or Stamp Duty
  • Now charges rent to practice
  • Created tax offset for practice
  • Took out large portion €300,000 off homeloan and removed short term loans
  • €300,000+ remaining tax free money for investment purposes
  • Diversified from property into managed funds
Alternative solution:
  • To repay loan on a pension backed mortgage basis

Case Study 4:

  • Orthodentist, Female aged 42, divorced
  • Own practice profits circa €300,000 - €400,000
  • Has limited company but CGT issue if sells the business to the company
  • Also is service not trading company
Issues:
  • Income tax not trading so higher tax to service company
  • CGT if sells
Solution:
  • Sell to limited company
  • Director’s loan will pay income
  • Takes €200,000 salary, leaves €200,000 in business
  • Saves €50,000 in tax annually
  • Available for pension funding

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