Closing company down & relocating to Spain - options

[jabot]

Hi all,

I will be relocating to Spain before the end of the year due to family reasons and would like to close my company down via MVL and apply for the Entrepreneur's Relief if possible. My UK limited company has been running for more than 2 years.

Timing is critical as I would like to do this while I'm still a UK tax payer as taxes are lower here than in Spain, so I've got some questions about this process:

1) Let's assume the company is closed by December 1st 2017, all the debts are now settled and the remaining funds in the company account are transferred to the shareholder accounts by let's say December 15th 2017. From a tax point of view, which date is the one used to calculate the Capital Gains Tax you owe HMRC? This is key to figure out if I need to be a UK vs Spanish tax resident on any of those dates.

2) How long does the liquidation process usually take for one-person IT companies like mine? My assets are basically a chair, some electronic devices, office stationary and of course, funds in the bank account.

Thanks for your help.

Regards,
J

[Maslins]

1) Let's assume the company is closed by December 1st 2017, all the debts are now settled and the remaining funds in the company account are transferred to the shareholder accounts by let's say December 15th 2017. From a tax point of view, which date is the one used to calculate the Capital Gains Tax you owe HMRC? This is key to figure out if I need to be a UK vs Spanish tax resident on any of those dates.

2) How long does the liquidation process usually take for one-person IT companies like mine? My assets are basically a chair, some electronic devices, office stationary and of course, funds in the bank account.

Kind of answering your queries together:
I'm guessing you've got your wording a bit muddled here. Funds would be transferred to shareholders before the company was closed. In the first sentence, do you perhaps mean "ceased" instead of "closed"? The liquidation process is fairly slow, mainly as it relies on action from banks and HMRC, plus even ignoring those, there are also minimum timescales that the liquidation needs to be left open for any potential creditors to object.

MVLO tend to suggest 4-6 weeks for a first distribution of 75% of your company's funds, and based on current timescales we're seeing perhaps 3 months for us to have all we need to move to finalise the liquidation and pay out the balance.

Typically it's the dates of the distributions that are relevant for capital gains tax purposes.

Worth checking with an accountant in Spain, but we gather from some of our other ex clients who have done it due to emigrating, typically if the business was in the UK, and closing funds taxed in the UK, where you go to would be unlikely to also want some tax, even where the distributions were happening after you'd moved there. Please note this is no guarantee that's the case, just what we've heard from a few other clients who have moved to a variety of other countries.

[jabot]

Kind of answering your queries together:
I'm guessing you've got your wording a bit muddled here. Funds would be transferred to shareholders before the company was closed. In the first sentence, do you perhaps mean "ceased" instead of "closed"? The liquidation process is fairly slow, mainly as it relies on action from banks and HMRC, plus even ignoring those, there are also minimum timescales that the liquidation needs to be left open for any potential creditors to object.

MVLO tend to suggest 4-6 weeks for a first distribution of 75% of your company's funds, and based on current timescales we're seeing perhaps 3 months for us to have all we need to move to finalise the liquidation and pay out the balance.

Typically it's the dates of the distributions that are relevant for capital gains tax purposes.

Worth checking with an accountant in Spain, but we gather from some of our other ex clients who have done it due to emigrating, typically if the business was in the UK, and closing funds taxed in the UK, where you go to would be unlikely to also want some tax, even where the distributions were happening after you'd moved there. Please note this is no guarantee that's the case, just what we've heard from a few other clients who have moved to a variety of other countries.

Thanks for the quick response.

Yes, as you pointed out it seems I've got some concepts mixed up but your answer was very enlightening anyway.

Based on your comments and if I understand correctly, it should be possible to aim for:

* Oct 31st -> Cease activity
* Mid-December -> Asset distribution
* January 2018 -> Become Spanish tax resident
* At some point in 2018 -> Ltd liquidation

Thanks again for your help,
J

[Maslins]

Based on your comments and if I understand correctly, it should be possible to aim for:

* Oct 31st -> Cease activity
* Mid-December -> Asset distribution
* January 2018 -> Become Spanish tax resident
* At some point in 2018 -> Ltd liquidation

Thanks again for your help,
J

I'd suggest it would be more like:
- Oct 31st - cease activity.
- Nov - accountant does their final bits, you settle final taxes etc.
- early Dec - appoint liquidator.
- Jan 18 - first distribution of ~75% of net assets.
- Mar 18 - close and pay out balance.

It's the liquidator that distributes the assets. The timescales above are very approximate, and are also based on how I'd anticipate it playing out with the liquidator firm I'm involved in. Things may vary with other liquidators.

[eek]

I'd suggest it would be more like:
- Oct 31st - cease activity.
- Nov - accountant does their final bits, you settle final taxes etc.
- early Dec - appoint liquidator.
- Jan 18 - first distribution of ~75% of net assets.
- Mar 18 - close and pay out balance.

It's the liquidator that distributes the assets. The timescales above are very approximate, and are also based on how I'd anticipate it playing out with the liquidator firm I'm involved in. Things may vary with other liquidators.

I suspect the first distribution needs to be in December 17 due to Spanish tax years.... Which probably means ceasing activity now or very soon.

I think it depends on how much money is in the company and how quickly you need to get to Spain...

[jabot]

Thanks all for your helpful answers.

[northernladyuk]

Kind of answering your queries together:
I'm guessing you've got your wording a bit muddled here. Funds would be transferred to shareholders before the company was closed. In the first sentence, do you perhaps mean "ceased" instead of "closed"? The liquidation process is fairly slow, mainly as it relies on action from banks and HMRC, plus even ignoring those, there are also minimum timescales that the liquidation needs to be left open for any potential creditors to object.

MVLO tend to suggest 4-6 weeks for a first distribution of 75% of your company's funds, and based on current timescales we're seeing perhaps 3 months for us to have all we need to move to finalise the liquidation and pay out the balance.

Typically it's the dates of the distributions that are relevant for capital gains tax purposes.

Worth checking with an accountant in Spain, but we gather from some of our other ex clients who have done it due to emigrating, typically if the business was in the UK, and closing funds taxed in the UK, where you go to would be unlikely to also want some tax, even where the distributions were happening after you'd moved there. Please note this is no guarantee that's the case, just what we've heard from a few other clients who have moved to a variety of other countries.

When I closed my UK Ltd and moved to Ireland, only UK taxes were due as it arose from business and work in the UK.

[vmaf]

Hi all,

I will be relocating to Spain before the end of the year due to family reasons and would like to close my company down via MVL and apply for the Entrepreneur's Relief if possible. My UK limited company has been running for more than 2 years.

Timing is critical as I would like to do this while I'm still a UK tax payer as taxes are lower here than in Spain, so I've got some questions about this process:

1) Let's assume the company is closed by December 1st 2017, all the debts are now settled and the remaining funds in the company account are transferred to the shareholder accounts by let's say December 15th 2017. From a tax point of view, which date is the one used to calculate the Capital Gains Tax you owe HMRC? This is key to figure out if I need to be a UK vs Spanish tax resident on any of those dates.

2) How long does the liquidation process usually take for one-person IT companies like mine? My assets are basically a chair, some electronic devices, office stationary and of course, funds in the bank account.

Thanks for your help.

Regards,
J

Hi jabot,

What did you finally do? I am in a very similar situation because I will be moving to Spain to a permanent position starting at mid January, but I am still contracting in the UK expecting to finish by the end of December.

I am trying to convince my agency to pay me December's time in advance (assuming I work x number of days in Dec). This is to try to start the Company MVL process before the end of Dec, therefore getting most of the funds in the Business account transferred to my Personal Account before 31st Dec to avoid the Spanish Tax Agency (Hacienda) to ask questions in the Spanish Tax return of 2018... (due June/Jul 2019)

Thanks!

[BlasterBates]

Hi jabot,

What did you finally do? I am in a very similar situation because I will be moving to Spain to a permanent position starting at mid January, but I am still contracting in the UK expecting to finish by the end of December.

I am trying to convince my agency to pay me December's time in advance (assuming I work x number of days in Dec). This is to try to start the Company MVL process before the end of Dec, therefore getting most of the funds in the Business account transferred to my Personal Account before 31st Dec to avoid the Spanish Tax Agency (Hacienda) to ask questions in the Spanish Tax return of 2018... (due June/Jul 2019)


Thanks!

I wouldn't worry about a payment arriving in your UK account in January for work done in the UK in December. They're not going to be looking into that. As an employee you will be taxed as PAYE from the beginning of the year and no-one in Spain will look any further.

[josedruanuk]

Thanks all for your helpful answers.

Hi there, I have seen this 3 years later, but how did it go? I am trying to do the same, and I'm scared that I will pay 10% to the HMRC in the UK, and Spain will ask me for another 10-15%, based on the double taxation relief (as they charge normally 20-25%).

Thanks in advance
Jose