Maximizing return on closing a company

[nopixels]

Hi All,

I’ve done a search, both on the forum and in general, Ive found a few answers (close the company, claim ignorance, get banned from being an MD) but I wanted the input of this forum.

I ventured back into the world of contracting in March time and it was my intention to continue this for the considerable future. However things change and I have been successful in securing a permie role on an exceptional package with a step up to management which in the long term is going to help me when I decide to come back to contracting, this however will be in a good few years time.

I’ve asked my accountant for advice so am waiting on his response but also I’d like to ask the experts on here…

My company and me as an individual are both registered in the north of England, this incl my bank, phone, car v5 etc.

I work and have been working in London Since March. I came to see how I liked and it and whether I would make it a more permanent thing. I have rented a property down here, as I understand it the majority of what I do Mon – Fri while in London can be expensed as I am only here for work….

In my business bank account I have saved away 20% of my daily rate, plus the 20% VAT I charge (FYI Im on flat rate scheme). All other funds have been paid to me as an individual. This saving is for various tax I have to pay etc.

I just transfer to myself 80% of my daily rate. I have no break down of what I have paid myself in PAYE or dividends etc etc, I have trust in my accountant that as and when this is required it would be on hand for me to access and give to the tax man.

So that’s the current situation, my accountant believes my expenses from working in London Mon – Fri are going to be very high. I know this is an point of contention over what can and cannot be expensed so please can we leave that to a separate discussion.

Now I wish to close down the company as I am moving to permie what are my options to maximise what I can withdraw from the company account, taking into consideration that this money is really actually set aside for tax bills etc

Yes I’m trying to minimise the amount of tax I pay, if that doesn’t sit comfortably with you then OK, have a good day

TLDR: I have a 10 month old LTD company, the money in the business account is set aside for my tax liabilities, how can I minimise what I have to pay if Im happy to close the company

Thanks!

[Chris at CrunchAccounting]

Closing advice

Hello nopixels,

The way the company could be closed depends on the remaining profits in the company at the point the company stopped trading, in order to be tax efficient. If this amount is less than £11,000 it would be best to close the company via DS01 with Companies House, which will strike off the company off the register. The remaining amounts would be a capital distribution and no tax would be due, if no other assets were sold in the tax year.

If amounts are higher than £11,000 it's slightly more complex as I would need to know whether your a basic or higher rate tax payer. No entrepreneurs relief would be available though as your have been trading for less than 12 months (capital gain tax reducer to 10%). Strategies might be that dividends could be taken before stopping trading or even a solvent liquidation (MVL). Your accountant should be able to give more bespoke advice on this.

What you can't avoid is paying Corporation Tax on company profits.

[JoJoGabor]

Maybe I've misunderstood but you've kept back only 20% to cover your Corporation tax which you have until 9 months after your companies year end to pay. So sounds like there are no retained profits in the company at all to withdraw??