URGENT HELP!! Divi before 6th or wait for correct advice on ER?

[WordIsBond]

I'm not an accountant.

But I suspect the best thing for you to do may be to pay yourself about £15K dividends now, taking the tax hit, to take your company assets to about £29.9K, just under £30K. After 6 April, pay yourself a £5K dividend to take advantage of the new tax free dividend allowance. Then, since you will be under £25K, wind up taking the remainder as capital. (If you have a spouse as a shareholder adjust the numbers accordingly.)

And then, if HMRC really does challenge someone on a distribution of less than £25K, which is highly unlikely, tell them, "Of course it wasn't tax motivated. I wound up the company because I wasn't contracting anymore."

You aren't doing anything wrong here. There is a risk that HMRC will be idiots, but I'd say the risk is very low, and also the risk is very low that you'd lose your case.

[AtW]

Then, since you will be under £25K, wind up taking the remainder as capital.

I believe that's no longer possible after 6th April 2016.

[WordIsBond]

Citation?

There are new restrictions on MVL, but the £25K threshold, as far as I know, is still operative. And even if HMRC goes stupid on challenging people who aren't contracting any more, I doubt they'd do it for someone below £25K.

The approach I suggested saves having to pay Maslins anything (sorry!) and reduces the risk of it being challenged. The risk of losing is low either way. And by taking about half of it as dividend, it reduces the cost in the unlikely event that a challenge by HMRC would succeed.

[jamesbrown]

I believe that's no longer possible after 6th April 2016.

No changes there AFAIK. The 25k was legislated back in 2012 and doesn't require clearance, unlike the old concession, ESC C16, which wasn't capped, but did require clearance. Basically, an MvL only makes sense if the distribution is substantially above 25k. Note that the Transactions In Securities rules would still apply, but I agree with WiB that it's less likely to cause problems.

[Louisa@InTouch]

It's still unclear in the legislation. The cautious approach would be to assume that it might also apply to those in employment doing the same 'activity' or wait and see when it's been clarified.

If you decide to distribute as a gain, claiming ER, you could keep cash aside and then suffer any interest/penalties if you are caught at a later date.

HMRC are obliged to apply the rules, even if the outcome is not as originally intended. A court/tribunal will apply the law as it's written. So there is a risk and it should be considered.

[TheCyclingProgrammer]

HMRC are obliged to apply the rules.

Only when the mood takes them.

[FarmerPalmer]

The first £30k of a redundancy payment is free of tax. Sounds like you could be being made redundant. Just saying (... and goes to get the popcorn).

[jamesbrown]

The first £30k of a redundancy payment is free of tax. Sounds like you could be being made redundant. Just saying (... and goes to get the popcorn).

Incidentally, the recent budget introduced NI on these payments from 2018. Anyway, even if you do have a formal contract of employment (most directors do not), you can't terminate your own employment and claim redundancy.

[segster]

Thanks for the suggestions. WordIsBond's sounds the most sensible balance of risk/reward.

[segster]

Interesting seems I have not factored in the £11,100 CGT allowance, so is the ER difference really that relevant?

I could gift my wife 50% of the shares as she has 11k available this year before the higher rate. So up to 10k Divi each before, 5k each after, and then wind up as capital with an 11.1k allowance each??