6 ways to utilise liquid assets

When a company has excess cash not being utilised in a bank account, it may choose to invest that money in ways that can potentially earn a higher return than by simply earning a small amount of annual interest. By doing so, the company can become less liquid, meaning that it has fewer assets that can be easily converted to cash, and spread risk.

Here are 6 ways a company may better utilise its assets to become less liquid:

  1. Investing in a Share Portfolio: A company may choose to invest some of its spare cash into a share portfolio, which can potentially earn a higher return than holding cash in a bank account. Dividends received from these investments are tax-free if the portfolio is held in a company’s name, however, as with any other withdrawals from a company there are various tax implications.
  2. Depositing Cash into Pension Schemes: A company may also choose to deposit some of its spare cash into a pension scheme, which can provide tax benefits and help the company fund future pension obligations. This can also help the company diversify its investments.
  3. Investing in Property: A company may choose to invest in property, either through direct ownership or through a property fund. This can provide a source of rental income and the potential for capital appreciation.
  4. Investing in Fixed-Income Securities: A company may choose to invest in fixed-income securities, such as bonds or treasury bills, which can provide a steady stream of income over time.
  5. Investing in Research and Development: A company may choose to invest in research and development to develop new products, technologies, or processes. This can potentially create a competitive advantage for the company and drive future growth.
  6. Acquiring Other Companies: A company may choose to use its spare cash to acquire other companies, either to expand its operations or to gain access to new markets.

With each of the above methods for diversification, it is important to consider that they may have a detrimental effect on the trading status of the business for Capital Gains Tax and Inheritance Tax purposes, along with other accounting and tax implications.

For more information on utilising liquid assets, please contact Sam Morris at sam.morris@ballardsllp.com


This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.

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