How remuneration planning can help your construction company

Category: Property & Construction - Posted On: Jan 26 2021


In light of the COVID pandemic, construction companies have seen a significant reduction in profits and cashflow. To support the continuation of the business, some business owners have had to pay in some of their own money and/or take out less income.

Our EQ Property & Construction specialists work together with our clients in order understand their finances to maximise their take home pay and minimise their tax liabilities. We’ve created an example below to show the importance of remuneration planning based on your situation.

Directors of a construction company that suffered a downturn in business in 2020 are looking to understand their income for 2021 and what their take home pay will be, they are husband and wife. In 2020, the directors lent the company £100,000 and the company operates from premises they own personally, though it has suffered some rent arrears. These added together with the existing director’s loan balance gave the directors a balance of around £150,000 due from the company.

Taking into account what the company can afford and based on the circumstances detailed, we would organise their individual income (each) for 2021 as follows:

Total Income £20,000
Salary £8,500
Rental Income £4,000
Interest on loan account £5,500
Dividends £2,000

The split of the income into the above categories means that the client has no personal tax to pay and their joint take home pay is £40,000. The company will get a tax deduction on £36,000 of the above, reducing their corporation tax by £6,840.

This example shows just how important it is to create a tax-efficient remuneration structure for your company. These tax-efficient structures enable companies to retain more profit and improve cashflow which helps with future prosperity, including the retention and recruitment of staff. Our EQ Property & Construction team support and assist our clients to ensure they operate as efficiently as possible, resulting in the best outcome for the business and the owners.

If you would like any advice on remuneration planning, please email our EQ Property & Construction team at property@eqaccountants.co.uk or contact one of our offices.