to close or not to close......

[SarahL2012]

Now before I get shouted down - I WILL speak to my accountant, but he's on holiday.

I'm in tentative talks with a client about doing a change role with them for 18-24 months which would mean going on their payroll. Its an interesting role and with what they're offering I'm not taking too much of a hit financially by going back to PAYE world.

I'm debating whether to close MyCo down or keep it open. I think its a good idea to keep paying insurances, PCG membership etc for the next year anyway in which case it might as well stay open. That would mean next year's P&L would have a small amount of interest income (about £100) and about £1000 in costs. Its also got a load of cash in there which I don't want to take as a dividend whilst I'm on PAYE because it will get taxed at 40%. I took a whopper dividend out in May when we were buying a house so I'm already getting hit on that one.

BUT - on the other side of the argument closing it down means there is a lot less chance of any sort of investigation because it won't be there any more.

Thoughts (nice ones)? Advantages / Disadvantages? What have other people done? What else do I need to consider?

Thanks in advance

[tractor]

...

Now before I get shouted down - I WILL speak to my accountant, but he's on holiday.

I'm in tentative talks with a client about doing a change role with them for 18-24 months which would mean going on their payroll. Its an interesting role and with what they're offering I'm not taking too much of a hit financially by going back to PAYE world.

I'm debating whether to close MyCo down or keep it open. I think its a good idea to keep paying insurances, PCG membership etc for the next year anyway in which case it might as well stay open. That would mean next year's P&L would have a small amount of interest income (about £100) and about £1000 in costs. Its also got a load of cash in there which I don't want to take as a dividend whilst I'm on PAYE because it will get taxed at 40%. I took a whopper dividend out in May when we were buying a house so I'm already getting hit on that one.

BUT - on the other side of the argument closing it down means there is a lot less chance of any sort of investigation because it won't be there any more.

Thoughts (nice ones)? Advantages / Disadvantages? What have other people done? What else do I need to consider?

Thanks in advance

If you really have serious plans to return to contracting, I would keep it open. Subject of course to the appropriate tax planning. £2k is low cost to keeping your options open (and your protections) compared to the tax hit for not doing so.

I don't believe you would need to de-register for VAT, just keep making the returns up and submitting them. Additionally, you can carry any trading losses back or forward appropriately.

Fair points below, I forgot ER @ 10%

[Maslins]

Do you anticipate doing any side projects via the company in evenings/weekends around the full time job? If not, and you're confident you'd stick this job for the 18-24 months, then I'd close it down.

Yes it's a bit of hassle/cost closing a company down, and potentially hassle/cost again if you wanted to open a new one in 2 years time...but I'd suggest less hassle/cost than keeping on top of all filings for the company for those two years. Plus you may get a bit of a tax break on the closing funds.

Don't think there's a right or wrong answer to this one. If you'd said 6 month employed role then expecting to return to contracting, I'd suggest keeping it open...but 18-24 months? My view would be close.

[northernladuk]

IMO.. and this is just my feeling and not based on any accountancy advice or anything but close every time you can. For me it just allows a clean sheet, no worries about retrospective inspections, IR35 etc and get every penny out of the company as often as you can. If you strike lucky in the future you could end up with a company 6 or 7 years old that you can't find a slot to close it down and use any nice tax breaks so do it as often as a real and reasonable situation occurs IMO. I'm busting to close mine down to start afresh but just can't find the right moment to meet the rules.

Yes I am aware closing a company might actually increase your risk of being inspected but if you run a tight ship it's not a problem.. if that is even true.

[TheFaQQer]

Now before I get shouted down - I WILL speak to my accountant, but he's on holiday.

I'm in tentative talks with a client about doing a change role with them for 18-24 months which would mean going on their payroll. Its an interesting role and with what they're offering I'm not taking too much of a hit financially by going back to PAYE world.

I'm debating whether to close MyCo down or keep it open. I think its a good idea to keep paying insurances, PCG membership etc for the next year anyway in which case it might as well stay open. That would mean next year's P&L would have a small amount of interest income (about £100) and about £1000 in costs. Its also got a load of cash in there which I don't want to take as a dividend whilst I'm on PAYE because it will get taxed at 40%. I took a whopper dividend out in May when we were buying a house so I'm already getting hit on that one.

BUT - on the other side of the argument closing it down means there is a lot less chance of any sort of investigation because it won't be there any more.

Thoughts (nice ones)? Advantages / Disadvantages? What have other people done? What else do I need to consider?

Thanks in advance

I think you'd have a good case for arguing that you have no intention to return to contracting, so shut it down and claim ER on the money coming out of the company at 10%.

If, after a couple of years, you want to come back, then I think HMRC would be hard pushed to proves that you always intended that, and to make a successful claim to disallow the ER granted two years previously. Who knows what you will be doing in that timeframe??

IANAA, though, but I'd see this as a good chance to shut down and get the money out at a lower rate than otherwise available.

[jmo21]

IMO.. and this is just my feeling and not based on any accountancy advice or anything but close every time you can. For me it just allows a clean sheet, no worries about retrospective inspections, IR35 etc and get every penny out of the company as often as you can. If you strike lucky in the future you could end up with a company 6 or 7 years old that you can't find a slot to close it down and use any nice tax breaks so do it as often as a real and reasonable situation occurs IMO. I'm busting to close mine down to start afresh but just can't find the right moment to meet the rules.

Yes I am aware closing a company might actually increase your risk of being inspected but if you run a tight ship it's not a problem.. if that is even true.

What do you mean by "find a slot" to shut it down? You just after a contract finished and before you start the next?

[northernladuk]

What do you mean by "find a slot" to shut it down? You just after a contract finished and before you start the next?

You missed the comment a few lines down...

can't find the right moment to meet the rules.

The right slot is a time where I can shut a company down correctly to meet all the rules and not push the boundaries of risk. In between contracts is not that slot. I am sure we all know a couple of contractors that shut them down every 2 years on the dot and often have one in liquidation while working in contract in the new one. That is not somewhere I would go.

[SarahL2012]

IMO.. and this is just my feeling and not based on any accountancy advice or anything but close every time you can. For me it just allows a clean sheet, no worries about retrospective inspections, IR35 etc and get every penny out of the company as often as you can. If you strike lucky in the future you could end up with a company 6 or 7 years old that you can't find a slot to close it down and use any nice tax breaks so do it as often as a real and reasonable situation occurs IMO. I'm busting to close mine down to start afresh but just can't find the right moment to meet the rules.

Yes I am aware closing a company might actually increase your risk of being inspected but if you run a tight ship it's not a problem.. if that is even true.

That was my thinking too. I'll probably give it a few months to 1) check I like the job & 2) make sure there isn't any other ongoing work that it would be useful to have the Ltd Co for. Is the increased risk of being inspected just contractor gossip or based on anything concrete? I thought they were mainly after public sector contracts these days and I stay well clear of those!

[Maslins]

That was my thinking too. I'll probably give it a few months to 1) check I like the job & 2) make sure there isn't any other ongoing work that it would be useful to have the Ltd Co for. Is the increased risk of being inspected just contractor gossip or based on anything concrete? I thought they were mainly after public sector contracts these days and I stay well clear of those!

I think that makes sense.

I personally have seen no evidence of increased inspections because a company is being closed down. We've had no new company tax investigations for MVL Online clients in >200 cases over last 2 years.

To leave a bit of risk/mystery out there, the above doesn't mean there haven't been any additional personal tax investigations prompted by the distributions. Not saying there have...just not saying there haven't either!