What a summer it has been! Brexit, the Euros (ironically), the Olympics and sneaking in there a 50% rate cut from the Bank of England. Granted when you say a 50% rate cut it seems like a lot, when in fact it was only 0.25%, but it does give you an idea of where the BOE thinks the economy is heading.
This was rather comically followed up with the banks issuing a press release saying they may now start charging businesses for holding their cash for them, as if they need more negative PR!
We have been saying for years now that cash is dead, I wrote an article with that very title way back in 2009!
I think we can all probably agree now that holding cash is not the way to make the most of your money for the foreseeable future, and beyond.
We regularly speak to clients who have large cash holdings in their business and there is nothing wrong with that if it has a purpose such as working capital, going to be used for acquisition, expansion, etc.
On the other hand, if the cash is just excess profit piling up year on year and you are now facing the prospect of being charged for it rather than getting whatever miserly return the bank was giving you, then you might want to think about your options. This is not the place for going into specifics but what we often hear is that people are comfortable having it the business and/or don’t want to withdraw it at this stage and incur tax.
These concerns are absolutely valid but there are options for both scenarios which mean you can keep it in the business but make it work a bit harder or take it out of the business and not suffer as much tax as you might expect.
Sometimes we bring smart ideas to business owners that are also simple ideas, which are often the best ideas. Revisiting this isn’t particularly earth shattering or complicated but could be a useful reminder to do something about a heavy cash position.