Closed my limited company to work on Plan B. I might have to start contracting again

**TheCyclingProgrammer** · 12 December 2017, 16:19

Firstly, did you take a capital distribution when you closed the old company? If you did not, then it doesn’t matter as there is no tax advantage that HMRC can counteract.

If you did, then it hinges on whether or not your Plan B constitutes the same trade or activity as before. If it doesn’t then again, you’ve got nothing to worry about.

Edit: not sure if you meant starting a new company for Plan B or contracting again. If it’s the latter and you did take a capital distribution before then you’d be best using an umbrella for now.

**bluedrop** · 12 December 2017, 16:30

Yes, I took capital distribution when I closed down my limited company.

Plan B is a self-employed business (at the moment. I might change it to a limited company or partnership once it grows a bit). Also, its in a COMPLETELY different area.

I meant starting a new limited company for starting contracting again (while plan B picks up).

**northernladuk** · 12 December 2017, 17:15

No such thing as a genuine reason when trying to get around HMRC's rules.

I'd also say Umbrella is your best bet as the rule is pretty clear. Might want to give Chris Maslin a ring for his opinion though. He must have come across this situation by now.

**TheCyclingProgrammer** · 12 December 2017, 18:19

Alternatively, depending on how big the capital distribution is and how bothered you are about using an umbrella, you could just go down the Ltd route and set aside the equivalent money in dividend tax just in case (or even proactively contact HMRC and ask if you can self assess the distribution as dividend income instead).

**BillHicksRIP** · 13 December 2017, 12:01

Originally posted by northernladuk View Post

I'd also say Umbrella is your best bet as the rule is pretty clear.

If you shut your limited and take a capital distribution, could you potentially work under an umbrella for 2 years then start a new limited? Or am I missing the context? I probably am.

**Darren at Fox-Bartfield** · 13 December 2017, 12:13

Closure

Did you fully document at the time, reasons for the closure so that it could be demonstrated that the closure was not for tax purposes and genuine cessation of trade?

**TheCyclingProgrammer** · 13 December 2017, 15:14

Originally posted by BillHicksRIP View Post

If you shut your limited and take a capital distribution, could you potentially work under an umbrella for 2 years then start a new limited? Or am I missing the context? I probably am.

Potentially yes, the assumption is that being employed by an umbrella (or anyone) does not count as continuing in the same business or trade but this is only based on HMRC guidance and their (current) interpretation of the legislation.

**bluedrop** · 14 December 2017, 13:12

Originally posted by TheCyclingProgrammer View Post

Alternatively, depending on how big the capital distribution is and how bothered you are about using an umbrella, you could just go down the Ltd route and set aside the equivalent money in dividend tax just in case (or even proactively contact HMRC and ask if you can self assess the distribution as dividend income instead).

Capital distribution - It was a fairly large amount. If I set aside money for dividend tax, I'll make a net loss for atleast a year if I return to work. Pointless.

I stopped trading in Dec 2015. I've been working on setting up Plan B since then. Does that not count at all? Only the liquidation date matters is it?

**bluedrop** · 14 December 2017, 13:14

Originally posted by Darren at DynamoAccounts View Post

Did you fully document at the time, reasons for the closure so that it could be demonstrated that the closure was not for tax purposes and genuine cessation of trade?

I think so. I'm checking this. Thanks

Closed my limited company to work on Plan B. I might have to start contracting again