Members Voluntary Liquidation

[Maslins]

I know of contractors that do this.

Yup, and a few who do it to keep off the radar for IR35 too (you'll never be too juicy a target if there's only 1-2 years worth).

[Alan @ BroomeAffinity]

@Alan I know a few firms who recommend that, indeed have done for over a decade (so nothing to do with ESC C16 changes). My understanding is it's less about the benefit of CGT treatment on close down, more about minimising exposure to IR35. Obviously a questionable tactic...but theory is it means HMRC can only ever go back a couple of years with any IR35 claim, so risk is reduced.

Apologies for resurrecting an old thread but I've just been forwarded the following which I a direct lift from the firm's website

"At XXX, we are always on the look out for opportunities for company directors to close their current company and start a new one, Why? Because of tax saving opportunities of course, which HM Government have made available to you, in the right circumstances, since 2008. How does it work?

If you close down your current company and start a new one, the funds that are left in the company after it ceases to trade and after all third party liabilities have been allowed for are available to the shareholder(s). These funds are treated in effect as the proceeds from the disposal of your shares. They do not need to be regarded as dividends when they are extracted from the company.

Take an example, assume that you have taken all that you can from the company without paying any higher rate tax, and that after 2 years, there are £50000 of funds sitting in the company, yours for the taking, but how do you do this? If you took them as dividends, the tax on £50000 would be £16000 and more. If you instead close down the company, the proceeds are currently received as a capital gain under “Entrepreneurs Relief”. Normally, when you have a capital gain, the first £11000 (currently) of gain is tax-free and you pay tax at 18% or 28% dependant on whether you are a higher rate taxpayer on your other earnings for the year. Under Entrepreneurs relief, the rate of tax is 10%. Therefore, the capital gains tax you pay would be about £4000, a saving of £12000, a no brainer! All totally above board, and you are fully keeping your head below the “Revenue parapet”. We have closed down over 500 companies this way and saved the shareholders of the order of £4-5 million."

[pr1]

Apologies for resurrecting an old thread but I've just been forwarded the following which I a direct lift from the firm's website

"At XXX, we are always on the look out for opportunities for company directors to close their current company and start a new one, Why? Because of tax saving opportunities of course, which HM Government have made available to you, in the right circumstances, since 2008. How does it work?

If you close down your current company and start a new one, the funds that are left in the company after it ceases to trade and after all third party liabilities have been allowed for are available to the shareholder(s). These funds are treated in effect as the proceeds from the disposal of your shares. They do not need to be regarded as dividends when they are extracted from the company.

Take an example, assume that you have taken all that you can from the company without paying any higher rate tax, and that after 2 years, there are £50000 of funds sitting in the company, yours for the taking, but how do you do this? If you took them as dividends, the tax on £50000 would be £16000 and more. If you instead close down the company, the proceeds are currently received as a capital gain under “Entrepreneurs Relief”. Normally, when you have a capital gain, the first £11000 (currently) of gain is tax-free and you pay tax at 18% or 28% dependant on whether you are a higher rate taxpayer on your other earnings for the year. Under Entrepreneurs relief, the rate of tax is 10%. Therefore, the capital gains tax you pay would be about £4000, a saving of £12000, a no brainer! All totally above board, and you are fully keeping your head below the “Revenue parapet”. We have closed down over 500 companies this way and saved the shareholders of the order of £4-5 million."

i bet jimmy carr's approach email was just as upbeat