Limited Company Closure Route

**Dan @ SG Accounting** · 10 March 2016, 07:25

I can't see any reason to doubt your accountant. Entrepreneurs Relief isn't going from April there are just some further restrictions on claiming.

**john@UKCA** · 10 March 2016, 09:08

Phoenixing

The tightening up on claiming ER on liquidation primarlily centres around phoenixing where you close one company down and then start up another company in the same field within a short space of time.

I can not quite see why ER is not available in you case post April 16 as you will packing up for good in the UK!

**Maslins** · 10 March 2016, 10:48

Yup, as others have said, I've heard nothing to suggest ER is going anywhere. There is the budget next week so always a chance of some surprise immediate changes there.

There was a consultation document a few months ago which slightly impacts MVLs, but to my mind it's been blown out of all proportion. Whether that's due to misunderstanding, or cynical "buy now or miss out forever" sales tactics, I don't know. As long as you don't start up a new business in the UK doing something similar within 2 years of the MVL, new rules shouldn't have any impact.

...but do keep an eye on the budget just in case.

**jamesbrown** · 10 March 2016, 11:19

To begin with, you should pay a dividend up to the higher rate threshold for 2015/16, regardless of how you choose to close your company. Next, if you don't plan to carry on the same trade or "activity" within two years, ER remains an option on your self assessment for 2016/17 following closure. In your specific case, it would be difficult to argue that tax is a primary motivation, since you're moving overseas. As noted by Maslins, listen out for the budget.

**alexmai** · 10 March 2016, 11:55

I am in the same boat.

I have been contracting for nearly 3 years on sub £400 roles, recently I have been offered a perm position which is close and offers an acceptable salary along with usual benefits.

My present contract is running out in the last week of March and my client may or may not renew - work is there but budget is constrained I am told. I have decided to accept the perm role though.

There is around 15k profits left in my ltd at present and the March invoice might bring another £7k to the business bank account (including VAT). I have used the £28600 dividend limit (higher rate threshold) this year for myself and my spouse (shareholder)

My accountant has given me two choices:

- Keep the ltd dormant (not sure if my perm employer will allow this as they are in financial domain)
- Closure (£350+VAT) along with March and April monthly fee, but they won't be doing my self-assessment return. Not sure they will be willing to do P45 and P60 though.

The perm role starts in April, so in the new tax-year.

I may come back to contracting if the perm role doesn't work out well.

Can I please get some advice on what is the best option for myself.

**Maslins** · 10 March 2016, 12:53

@alexmai my view would be leave the company open until you've completed any probationary period. When you've got through that and presumably both you want to stick with it and they want to keep you, then closing down makes sense, unless you're anticipating significant side projects.

Sounds like your final net asset position should be below £25k, so you shouldn't need an MVL (unlike the OP) to get CGT treatment. I'm guessing the £350+VAT quoted by your accountant won't be a liquidation, and doesn't sound unreasonable for the work involved in getting your company's tax affairs tidied up prior to strike off.

If you did restart contracting within 2 years of closing, you'd run the risk those closing funds would be taxed on you as dividends instead of CGT.

**john@UKCA** · 10 March 2016, 12:57

Stricking Off

Originally posted by alexmai View Post

I am in the same boat.

I have been contracting for nearly 3 years on sub £400 roles, recently I have been offered a perm position which is close and offers an acceptable salary along with usual benefits.

My present contract is running out in the last week of March and my client may or may not renew - work is there but budget is constrained I am told. I have decided to accept the perm role though.

There is around 15k profits left in my ltd at present and the March invoice might bring another £7k to the business bank account (including VAT). I have used the £28600 dividend limit (higher rate threshold) this year for myself and my spouse (shareholder)

My accountant has given me two choices:

- Keep the ltd dormant (not sure if my perm employer will allow this as they are in financial domain)
- Closure (£350+VAT) along with March and April monthly fee, but they won't be doing my self-assessment return. Not sure they will be willing to do P45 and P60 though.

The perm role starts in April, so in the new tax-year.

I may come back to contracting if the perm role doesn't work out well.

Can I please get some advice on what is the best option for myself.

You do not need to liquidate - just go down the Stricking off Route.

Striking off -Striking off is the process in which a solvent company is dissolved and struck off the Companies Register. It is often known as "dissolution".
Striking off is an alternative procedure to a formal liquidation.
A company may be struck off the companies register by the registrar of companies if it not carrying on any business or operation. A company may also voluntarily apply to be struck off the registrar.

Voluntary striking off- The company must be solvent and the directors complete form DS01 to apply for striking off. If the company retains any assets including share capital these will become Bona Vacantia and the property of the Crown when it is struck off.

A repayment of capital of up to £25,000 may be made to shareholders on striking off are treated as capital for tax purposes. Where assets are in excess of £25,000 capital tax treatment may be obtained by using liquidation instead of striking off.

**Fred Bloggs** · 10 March 2016, 13:38

If you're stepping straight into a permie job, I'd be tempted to lob all the cash in a pension and tell the accountant to have the company struck off. No need to worry about any tax then.

**alexmai** · 10 March 2016, 13:38

Thanks very much for helpful responses.

Would it be beneficial to use the £5k dividend limit next tax year for myself and my spouse to exhaust the remaining profit in the limited company. Remaining profit (if any) can be released as capital gain. I will be on a £65k+perm role so not sure if this £5k dividend will affect my PAYE tax liability.

Or, should I go down the route of releasing all of the remaining profits (15-20k possibly) as capital gain? Will this need to be divided among shareholders?

Limited Company Closure Route