To close the company down or not?

[stek]

In my experience most contractors close down their company when a contract ends - but of course some of them have multiple contracts over many years and some only have one contract throughout the lifetime of the company.

I've never heard of any, that would mean some would have about 4 company startups a year!

[Forbes Young]

I've never heard of any, that would mean some would have about 4 company startups a year!

What I meant was a contractor may use the same company for many contracts over many years and close the company down at the end of the final contract. Whereas there are some contractors who only use their company for a single contract then close the company down at the end of it.

[TheFaQQer]

What I meant was a contractor may use the same company for many contracts over many years and close the company down at the end of the final contract. Whereas there are some contractors who only use their company for a single contract then close the company down at the end of it.

Hopefully the latter lot don't claim travel and subsistence to their permanent place of work...

[Zero Liability]

I have one minor reservation on jumping in to close downs; to me it can make things look more like disguised employment if the company is closed down immediately a contract ends.

That said its gut feel only, and not backed up by anything in the trinity of status tests. If HMRC were efficient it may be a trigger to them; From experience I don't think it currently is.

It could be used as an indicator but an unreliable one I'd imagine as there are many reasons why one might close down, and besides, they'd only have sight of your contracts if they chose to investigate you to begin with. I would think they'd rather focus their limited resources on pursuing artificial closures and subsequent incorporations.

Also, if they were efficient you could argue they'd spend their resources on more lucrative avenues than IR35 to begin with, and I suspect the FLCs are an attempt to do just that.

[Jessica@WhiteFieldTax]

It could be used as an indicator but an unreliable one I'd imagine as there are many reasons why one might close down, and besides, they'd only have sight of your contracts if they chose to investigate you to begin with. I would think they'd rather focus their limited resources on pursuing artificial closures and subsequent incorporations.

Also, if they were efficient you could argue they'd spend their resources on more lucrative avenues than IR35 to begin with, and I suspect the FLCs are an attempt to do just that.

The rational side of me quite agrees ZL, the irrational side worries.

[Maslins]

I have one minor reservation on jumping in to close downs; to me it can make things look more like disguised employment if the company is closed down immediately a contract ends.

If we consider a non-contractor business. Their sole/main income stream has just disappeared, they're moving on to do other things, and have no intention of continuing the trade. Why wouldn't they close down immediately after the income ceased? I don't see why a contractor would be any different.

I appreciate the "no intention of continuing the trade" is the sometimes grey one for contractors, as they're perhaps more likely than other businesses to cease, take on a PAYE role/similar, then start trading again doing something very similar relatively soon after (ie months/low number of years)...but if we're simply talking about time between ceasing and closing in isolation, I don't see any difference between contractors and other businesses, and therefore don't see any reason why closing very soon after ceasing is in any way contentious. As above, I think for practical reasons it can make sense to delay, eg not being kept on following probation at a permie role.

As an aside, transactions in securities (TiS) is something that if it were to bite would materialise following personal tax returns, and it'd be those distributions which could theoretically be challenged. However, wouldn't any risk along the IR35 lines bite the company, and therefore be challenged during close down? To date, with ~250 liquidations under our belt, MVLO haven't seen a single hold up relating to IR35 enquiries.

My point being, I'm still modestly cautious about TiS as that could bite further down the line, but I've seen zero evidence of closure prompting IR35 questions.