MVL and Ltd Company to Umbrella ?

**northernladuk** · 26 February 2016, 10:11

http://forums.contractoruk.com/futur...l-clarity.html

http://forums.contractoruk.com/accou...vl-latest.html

**poster2034** · 26 February 2016, 10:25

Thanks, I'd had a look at those already.

I can't seem to find specifics on working under an umbrella - I guess that's 'the same/as good as' taking a permanent role.?

**LondonManc** · 26 February 2016, 10:35

Originally posted by poster2034 View Post

Hi,

My situation is that I've been IT contracting for a couple of years under a ltd company and would like to now withdraw the money in the business.

I understand the changes coming up in the new tax year, MVL/Entrepreneurs Relief and dividend changes for 2016.

The most tax efficient way would have been to liquidate this year (Putting aside the issue of trying to liquidate in such a short time frame). What I not clear on are my options after then - I could go into a permanent role or even go work abroad. Could I also switch to working under an Umbrella company from April 2016 onwards ?

One other unknown is how long until I could return back to contracting under a ltd company, is the general consensus 1 or 2 years ?
Thanks, any advice appreciated

Once you've dissolved your company and "settled up", you're free to do whatever you want. The only thing that would be a flag to HMRC is if you start up another Limited Company in the same industry sector, as you've alluded to below. There was a thread on here a month or so about it that you may want to try and find it. Essentially, if you shut down your IT consultancy and start up a property letting company, you'll be fine; it's very much about hector clamping down on misuse of ER.

I would imagine Lisa on here has dealt with Ltd Co contractors going back through her umbrella co - give her a shout.

**poster2034** · 26 February 2016, 10:55

But Im talking about closing down my LTD company and then working next financial year via an Umbrella Company ?

**northernladuk** · 26 February 2016, 10:57

Give Maslins a call. He is part of MVL Online so should be all over this. He does come on here occasionally but might be better to call him rather than wait.

**stek** · 26 February 2016, 10:58

Surely what you'd save in ER would be eaten by the extra tax you'll pay via brolly? Unless you're talking about 100's of thous in the company coffers.....

**ChimpMaster** · 26 February 2016, 11:01

Wait for the budget next month, which is touted to include further clarification on MVL rule changes.

**Maslins** · 26 February 2016, 11:11

My views up to about a month ago would be that liquidating a Ltd Co to take on a permie/umbrella position would be safe (though be aware with new rules you'd need to wait at least two years before restarting another contracting business, you can't just go umbrella for 3 months then restart).

However, very brief exchange with the guy behind the consultation it seems he believes:
- taking on a permie/umbrella role in similar field WOULD count as doing a similar trade/activity, but
- he suggested you'd probably be fine in that main motivation would NOT be tax.

For me, this was a concern. HMRC could easily change their view on the second point, and being honest it'd be hard for someone in your position to argue that the tax benefits of an MVL were of no relevance to your decision.

I've requested they specifically say those taking on permie roles shouldn't be at risk...but of course whether they listen to little old me is doubtful.

Reality is I don't know any more than the rest of you. The new legislation is still subject to finalisation. I'm sure the person behind it got many responses beyond mine, but I don't know what they were, or whether any notice will be taken.

Unfortunately as with so much tax stuff these days, it's a case of "nobody really knows". Sucks don't it.

**ChimpMaster** · 26 February 2016, 11:22

Originally posted by Maslins View Post

My views up to about a month ago would be that liquidating a Ltd Co to take on a permie/umbrella position would be safe (though be aware with new rules you'd need to wait at least two years before restarting another contracting business, you can't just go umbrella for 3 months then restart).

However, very brief exchange with the guy behind the consultation it seems he believes:
- taking on a permie/umbrella role in similar field WOULD count as doing a similar trade/activity, but
- he suggested you'd probably be fine in that main motivation would NOT be tax.

For me, this was a concern. HMRC could easily change their view on the second point, and being honest it'd be hard for someone in your position to argue that the tax benefits of an MVL were of no relevance to your decision.

I've requested they specifically say those taking on permie roles shouldn't be at risk...but of course whether they listen to little old me is doubtful.

Reality is I don't know any more than the rest of you. The new legislation is still subject to finalisation. I'm sure the person behind it got many responses beyond mine, but I don't know what they were, or whether any notice will be taken.

Unfortunately as with so much tax stuff these days, it's a case of "nobody really knows". Sucks don't it.

It's to HMRC's advantage to leave the rules vague and open to suggestion, because ultimately it means that they can go back in their time machine and retrospectively clarify the law to their benefit. It makes tax and life planning very difficult for the public, but all HRMC care about is that they collect the maximum tax possible (not necessarily the 'right' amount).

As I've said before, I will be going through MVL later this year and then I may well take 2 years off before settling into a local IT job. It'll mean 2 years off work for me and 2 years' less income tax for HMRC, but that appears to be the rule that they want me to follow.

MVL and Ltd Company to Umbrella ?