winding up my company

[tim123]

After 30 years contracting I am looking on getting out

I have been working this year an have accumulated a significant balance in my bank account

I (sort of) understood that I could wind up my company, converting this balance to a capital gain and claim entrepreneurs to result in a 10% tax rate on this sum

but my accountant tells me that I have to declare this sum as a profit, pay 20% CT and then the 10% CGT on top.

If she is right, why would people do what I am thinking of doing? I don't see any significant advantage .

Any one got any pointers please

tim

[Alan @ BroomeAffinity]

The CT has already been paid. But even taking that into account that's only 30% as opposed to 40% on dividend.

But I'm guessing, only guessing mind, that after 30 years contracting you're approaching retirement age so pension contributions could be a better tax planning option.

[Waldorf]

The CT has already been paid. But even taking that into account that's only 30% as opposed to 40% on dividend.

But I'm guessing, only guessing mind, that after 30 years contracting you're approaching retirement age so pension contributions could be a better tax planning option.

If the dividend was taken by 5th April 2016, the most tax of the dividend would be 30.56%, if taken on 6th April or after, the most tax would be 36.1%.

Either you have been confused with what your accountant has said or she is rubbish.

CT should have already been paid so this makes no difference to the sums. Taking advantage of entrepreneurs relief seems to be the best option. You could look at pension contributions but whether this is available to any great extent depends upon your circumstances.

Take advice quickly, you only have a few days left of the current tax year.

[eazy]

Confusion?

I think your accountant is possibly right.

If this income is your turnover for the current tax year, then no corporation tax has been paid. Any profits retained from previous years do not require additional corporation tax payments.

Dividends and capital gains can only be taken from retained profits (once all taxes have been paid/taken in to account). Additional 10% (ER) will have to be paid on liquidation of you company.

[Alan @ BroomeAffinity]

I think your accountant is possibly right.

If this income is your turnover for the current tax year, then no corporation tax has been paid. Any profits retained from previous years do not require additional corporation tax payments.

Dividends and capital gains can only be taken from retained profits (once all taxes have been paid/taken in to account). Additional 10% (ER) will have to be paid on liquidation of you company.

Yes. That's probably true. I missed the key "this year" from the initial post. Ignore me.

[WordIsBond]

Yes. That's probably true. I missed the key "this year" from the initial post. Ignore me.

You can comfort yourself that you weren't the only ignorable one.

OP

You need to see any money brought in this year as different from money retained from previous years.

Money from previous years, the corporation tax has already been paid. Money from this year, you still have to pay the corporation tax, unless, as has been suggested, you can put it into a pension, which might be worth considering depending on your circumstances. If you don't do that, it's profit, just like it was in every other year.

Once the CT is paid, then you can view all these funds the same (money from this year, money from prior years). It's money your company holds. How are you going to get it out of the company? You can take dividends and pay tax on that, or you can go the ER/capital gains route. If you have much money, the ER/capital gains route is going to be a lot better.

[tim123]

OK

So this only works for distributing the funds remaining after declaring a dividend/salary of (approx.) 40K, because that is the amount which uses up my 20% band.

The rest I pay 0/10% CGT on instead of 40% tax.

thanks

tim

[tim123]

OK

So I'm going to re-open this question because I have done 2 stupid things and I watn to check that I am safe from from the changes in the rules as per:


Why company distributions on liquidation never looked so taxing :: Contractor UK

The first mistake was that I mistimed transferring the money and it left my company account in TY 2016-17 - Oops.

the second mistake was, after agreeing with my accountant that we were going to wind up the company at YE 2106 the client decided that he needed a few more days work from me - so I got the agency to PAYE me for those dates.

So does this count as "continuing to trade"?

I know that it doesn't in the normal legal sense of the word, but does it for this specific legislation?

None of the examples in the posted link deal with the situation of someone winding up their company and then taking a permi job (which must be a normal situation, though perhaps not always related to the previous trade), so what is the position here?

does anybody know

TIA

tim (beginning to wish I hadn't started down this path)

[northernladuk]

the second mistake was, after agreeing with my accountant that we were going to wind up the company at YE 2106 the client decided that he needed a few more days work from me - so I got the agency to PAYE me for those dates.

So does this count as "continuing to trade"?

I know that it doesn't in the normal legal sense of the word, but does it for this specific legislation?

It doesn't? Stop doing stuff for money... then do it again for money... How is that not continuing to trade in any sense? You mean the fact it's PAYE?

And cockup number three is cocking up twice and then coming to a bunch of strangers on the internet for advice. Don't forget to leave some space for cockup 4 onwards.........

[badgernumber1]

W.r.t. the new rules, no one yet seems clear whether permanent employment constitutes continuation of trade. E.g. my accountant says their 'understanding' of phoenixing is such that you're not guilty 'where you go into employment'.

You sure HMRC won't consider you guilty of money-boxing and tax your distributions as dividends anyway? Even if you're retiring? FWIW, my accountant's advising that this ought not to be the case, but opinions again vary in this respect.

The government consultation response states that HMRC will publish information (e.g. example cases) to help clarify this area. Are you committed to liquidate yet?

P.S. Check this out: http://forums.contractoruk.com/accou...-umbrella.html