Close company or leave dormant

[LimitedMan]

Hi,

I have been contracting for almost 20 years and have built up quite a bit of money in the company, my plan was always to contract until retirement and then drip feed the money out of the company in retirement as low salary.

Events have over taken me and now I have just taken a permanent job, reckon got another 15 years of working before retirement and now not sure whether my original plan holds or be better off closing company via MVL route ( seen this service offered Company Closure & Members Voluntary Liquidation | Nixon Williams ). If qualify for entrepreneurs relief which seems likely then reads like would only pay 10% tax on everything in the company (almost seems to be good to be true !). 10% is still quite a hit but weighing this up against keeping the company going for 15 years and any rule changes in future, guess having money outside company also give me options of investing it (ISAs) - I have already maxed out pension contribution each year through company.

As time goes on I guess the likelihood of an IR35 investigation diminishes although bit concerned the closing could trigger one (contracts are okay but have been at same place a long time - do have the QDOS insurance).

Wandered if anyone else been through same and can offer any advice or am I missing something.... Any comments greatly appreciated.

[TheCyclingProgrammer]

I'd say go for the MVL if you are eligible. There's still some uncertainty I believe, over whether under the new rules taking a permanent job (assuming it relates to what you were doing when contracting) would constitute continuing the same activity so you need to speak to your accountant about this. Its been discussed on here several times but I'm not sure if any meaningful conclusion has been drawn.

[northernladuk]

Have a chat with Chris Maslin who runs MVLOnline. He's posted a number of indepth threads about the whole MVL thing so I'm sure he'll have the low down.

[Maslins]

Yeah an MVL may well be a good option for you assuming you've got well over £25k retained profits. The 10% CGT with entrepreneurs relief is generally very appealing when compared to tax on an equivalent dividend.

Weigh that up against £5k annual dividend allowance for however many years that would take to drip feed it...factoring in ongoing accountancy cost/hassle.

FWIW we (MVL Online) haven't seen a single IR35 investigation triggered on any of our cases (circa 400 to date). Of course that's no guarantee you wouldn't be the first, but I'd suggest it's unlikely. Some people would recommend keeping the QDOS insurance going for a while longer just in case.

If you've got any specific queries, let us know.

@TCP - whilst not concrete, have a read of this post. That scenario now looks safe IMHO.

[TheCyclingProgrammer]

@TCP - whilst not concrete, have a read of this post. That scenario now looks safe IMHO.

Thanks. That does look like good news (though I couldn't open the link you posted). It feels like we should get a sticky in this forum that at least provides an overview of the current state of things.

[LimitedMan]

Thanks for quick replies, the permanent job is with the company I have been contracting with for last number of years - was worried this would look a bit dodgy, spoke to accountant and QDOS and they seemed to think just a problem going the other way from permanent to contractor, is there anything in the MVL rules that would stop me using that route if it were deemed the same role or is it just an IR35 problem ?

Apologies just re-read Maslins post and seen the link, the pdf at the bottom of that linked post (https://ion2.icaew.com/taxfaculty/b/...n-a-winding-up) does read well for taking a permie job although the example 3 that is given is at a different firm - in my case I will be taking a permie job at same place - think point example is making is that a permie role is okay but just wish an example of my situation was given - any thoughts on my situation with regards to carrying on same activity ?

[Maslins]

Thanks for quick replies, the permanent job is with the company I have been contracting with for last number of years - was worried this would look a bit dodgy, spoke to accountant and QDOS and they seemed to think just a problem going the other way from permanent to contractor, is there anything in the MVL rules that would stop me using that route if it were deemed the same role or is it just an IR35 problem ?

Might be worth you looking at the last comment in the thread I pointed TCP to. In responses to clearance requests, HMRC have said "Condition C will not be met where the individual is employed by an unconnected third party."

I assume "unconnected" in this sense means the employer isn't a company run by your brother/mother/whatever...but I guess it could be interpreted as one being connected to your Ltd Co. In which case possibly it being the last client of your Ltd Co and first employed role might be caught.

Don't know I'm afraid...and it's an area where you're unlikely to find any cast iron answers, just people's opinions/speculation

[LimitedMan]

Thanks again for replying, yes the word 'connected' is open to interpretation but hope it means connected by means of artificial arrangement like you suggest. A huge decision to close as the tax implications are large if connected suddenly applies to my situation after MVL done, be great if anyone out there has been through process since new legislation in same situation to me or any accountants that have similar client, thanks for all help so far.

[Maslins]

...be great if anyone out there has been through process since new legislation in same situation to me or any accountants that have similar client, thanks for all help so far.

What you're essentially asking is has somebody else (or an accountant overseen a situation where):
- liquidated Ltd Co receiving distributions after 6 April 2016,
- gone into a PAYE role with the last client of their Ltd Co since then,
- also somehow done a personal tax return for the tax year ending 5 April 2017 declaring the distributions as CGT,
- enough time has gone by that HMRC have lost the ability to enquire into that SA return.

Ie afraid the earliest you might get someone in that situation is likely to be about 2 years from now, sorry!

[LimitedMan]

Apologies, see timing is ahead of a definitive answer but wandered if any accountants/people are in same position and how they are interpreting 'connected' - be good to get a warm feeling if a bunch of people came back (especially accountants that have a lot more experience of HMRC speak than myself) and said that in this situation they are interpreting 'connected' does not apply - given timing can see there might not be a flood !

This thread has really helped and thanks for contributions, looking at the examples and my situation it is a genuine move into permanent employment at end of contracting life and not trying anything fishy so do not feel that would be caught (famous last words !).

Many thanks