Members Voluntary Liquidation questions

[northernladuk]

IIRC from our previous discussion, I raised the point that you can't completely rely on HMRC guidance for this as they have not been updated to account for the more recent changes in legislation.

Notably, the counteraction provisions can only apply if HMRC can show that the main motivation for any TIS was to gain a tax advantage (not merely that a tax advantage was gained). In other words, if you're shutting down your company with the intention of starting up again in order to gain a tax advantage, it would probably be caught. If you're shutting down your company for some other genuine reason (like starting a permanent job) then it should not be caught by the latest rules.

On that basis, even if you were to return to contracting again in the future and start a new company, the argument of whether or not its a continuation of your previous trade is a moot point.

As ever, the main issue here is that there is no 100% definitive answer because this hasn't really been tested. So its a judgement call. On balance, I personally think the risk is minimal if you have a genuine commercial reason to close down your company and not a tax-motivated reason. After all, nobody can ever say for certain what they may or may not do in the future - its about your intentions at the time.

The fact that some people regularly close down and start up new companies (often referred to as "phoenixing") purely to gain a tax advantage and seem to get away with it just demonstrates, IMO, that this kind of behaviour isn't really on HMRCs radar...for now. Which is even more reason not to worry about it if you have genuine reasons, but I suspect those who regularly phoenix might be skating on thin ice if HMRC ever decide to pursue this behaviour more aggressively.

Just with my pedant hat on for a second I didn't think shutting down for a tax advantage was technically Phoenixing. The definition of Phoenix companies is..

A phoenix company is a commercial entity which has emerged from the collapse of another through insolvency. Unlike "bottom of the harbour" and similar schemes that strictly focus on asset stripping, the new company is set up to trade in the same or similar trading activities as the former, and is able to present the appearance of "business as usual" to its customers. It has been described as "one that that arises amidst or from the disarray and demise of its predecessor."

We don't do this really so more under GAAR than Phoenixing? Although I guess you could include it under asset stripping but still, our situations don't seem to meet the definition. A very pedantic point as you could argue you liquidating your company is some form of demise...

All that said I would still call it Phoenixing in these types of discussions

[Craig at Nixon Williams]

Craig!! Where the devil have you been???

I’ve been busy, NLUK, developing our online accountancy application. I’d highly recommend it if you want to give it a try?!

[northernladuk]

I’ve been busy, NLUK, developing our online accountancy application. I’d highly recommend it if you want to give it a try?!

I'd love to. Send me your email and I'll send you my day rates over

[TheCyclingProgrammer]

Just with my pedant hat on for a second I didn't think shutting down for a tax advantage was technically Phoenixing. The definition of Phoenix companies is..

No, you're quite right. Phoenixing is actually something different but its commonly used to describe the scenario you outlined too.

[neilkellett]

Purnells

https://www.purnells.co.uk/limited-c...uidations.html

Can highly recommend Suzi Purnell. She sorted my MVL out 2 years ago. She knew far more about the process than my PCG approved accountant and saved me fees that they were looking to charge.

[regron]

I’ve been busy, NLUK, developing our online accountancy application. I’d highly recommend it if you want to give it a try?!

Oooo.... new updates due Craig ?

[Craig at Nixon Williams]

Oooo.... new updates due Craig ?

We have a few small improvements to functionality due for release quite soon – these have been developed based on feedback received over the past few months so will hopefully prove to be popular with existing users.

We have also been working on mobile applications, for iOS and Android, which are in alpha test at the moment and will be moving to beta shortly (iOS will be ready first). These represent our main development effort since launch last year.

[northernladuk]

Does it help you pay your expenses from the company to your personal account. I know a poster that might be interested in that

[melb]

Hi, I stopped contracting about 11 months ago and have been a perm employee since then. I have approx £120k in my Limited Company account, no debt or other assets and have all my corp tax paid. My accountants advised me to go through a strike out and pay full CG on my earnings, which I agreed to. Since then some friends mentioned that they would be going through MVL and applying for entrepreneurial relief. I didn't even know what this was! I have since withdrawn my strikeout. My accountants said I wasn't eligible for ER when I asked them why they didn't suggest it (apparently theres a £25k limit???). I am now feeling very lost and trying to figure out the best approach for me given my situation, but I have no tax background. Based on some research MVL seems like the right path and other tax advisors told me I should be eligible for ER. Now I just need to appoint a liquidator.

My accountants referred me to someone who quoted £2500+ all additional expenses + vat. I have seen a few posts here about MVL Online and wanted to get your thoughts. Its seems like all the posts on positive experiences using MVL are people who have only made < 10 contributions to this forum so Im a bit wary of how real they are... maybe I am being overly cautious.. Can anyone suggest a reliable, reasonably priced liquidator ..

[ContrataxLtd]

Hi, I stopped contracting about 11 months ago and have been a perm employee since then. I have approx £120k in my Limited Company account, no debt or other assets and have all my corp tax paid. My accountants advised me to go through a strike out and pay full CG on my earnings, which I agreed to. Since then some friends mentioned that they would be going through MVL and applying for entrepreneurial relief. I didn't even know what this was! I have since withdrawn my strikeout. My accountants said I wasn't eligible for ER when I asked them why they didn't suggest it (apparently theres a £25k limit???). I am now feeling very lost and trying to figure out the best approach for me given my situation, but I have no tax background. Based on some research MVL seems like the right path and other tax advisors told me I should be eligible for ER. Now I just need to appoint a liquidator.

My accountants referred me to someone who quoted £2500+ all additional expenses + vat. I have seen a few posts here about MVL Online and wanted to get your thoughts. Its seems like all the posts on positive experiences using MVL are people who have only made < 10 contributions to this forum so Im a bit wary of how real they are... maybe I am being overly cautious.. Can anyone suggest a reliable, reasonably priced liquidator ..

Hi Melb

I think there has been some confusion here on the part of your accountant from what you have said.

With £120k in the bank (assuming this is purely retained profits) you can either withdraw it as a dividend (possibly over a number of years) and pay the tax accordingly, probably not very efficient this though assuming you are earning in excess of the High Rate threshold with your permie job

or

Go through a Members Voluntary Liquidation. This will enable the withdrawal to be treated as capital and probably taxed at 10% (after the annual exemption of £11,000 for 2014/15 - £11,100 in 2015/16) assuming you qualify for entrepreneurs relief. You could even possibly get a distribution in 2014/15 to use this years annual exemption with the balance being distributed in 2015/16 to save even more tax!

To qualify for Entrepreneurs relief you need to have held at least 5% of the shares in the company for at least 12 months, you must have been an officer or employee and the company must have been trading. It's not clear if you meet all these but assuming you've been contracting for a while to generate £120k retained profit you probably do.

MVL Online are the cheapest liquidators around at the moment I think and come highly recommended on here. I've dealt with Chris there a few times and he couldn't have been more helpful on all occasions!

The £25k limit is a bit of a red herring in this context, if net assets are below £25k you can close the company down using the simple strike off procedure and treat the distribution as capital (similar to the old ESC C16 but this didn't have a Monetary cap).

It also sounds like a DS01 had been submitted to Companies House to start the strike off procedure which I think you have withdrawn? Please ensure that any strike off procedure has been cancelled as your bank account could be frozen as part of the strike off proceedings if not done properly!

Hope this helps

Martin
Contratax Ltd