Sticky Situation - Excess Retained Profits

[Subway]

deleted

[Lance]

Pay the UK tax. It's the decent and honest thing to do.
Talk to an accountant about an MVL. It'll cost you some money but they will advise you best how to do it legally.

[Lance]

I'd prefer to pay the tax in the UK if possible to keep it clean and tidy. Just timing wise, unsure if I can make the most of the Entrepreneurs Relief rather than 32.5% as a dividend.

You need an accountant. This is a specialist area. It costs money. Do a search for MVL (members voluntary liquidation) on these forums.

[Patrick@Intouch]

What level of retained profit have you built up in the company? If this is in excess of £25k then you would need to look at formal liquidation. If less than £25k then you could close the company without the need for a formal liquidation.

It would also be useful to consider your income as a whole for the 2017/18 tax year so that the tax implications of further income can be assessed correctly.

[malvolio]

Retained profit is circa £15k, but this is after maxing out my dividend allowances/directors salary and tax free allowances under the basic rate.

I agree a formal liquidation isn't necessary, its more a timing issue, whether I can utilise entrepreneurs relief before the 3 months required to close the company i guess.

You don't have to be in the UK to manage the closure, surely. Can't you run it to completion from White Cloud Land, transfer the resultant funds to your new account and shut things down in the UK? The income was earned in the UK after all, so is only subject to UK taxation.

Or does the NZ tax system mean you pay more tax if you bring in already tax-paid personal income from abroad?

[WTFH]

In which case paying 32.5% on a dividend while im UK tax resident would be more advantageous than paying 33% in NZ.

0.5%? That's the big issue?

32.5% of 15k is 4875
33% of 15k is 4950

A £75 saving.

[BrilloPad]

Remember to keep your company bank account open a while just in case.....

[Avner]

How much are your drawings in the current tax year, which you say will be 'dividends'. If this, together with the retained profits of £15k are more than £25k, you can have the drawings (rather than dividends) distributed to you in specie, with the balance distributed in cash, all as capital disquisitions which you claim entrepreneurs relief on at 10%. You will need to do this through an MVL, but this can be done cheaply and save you a lot of tax. The distributions can happen well before 3 months too.

[Patrick@Intouch]

OK, so the first confusion is around the timing of the company dissolution versus the date at which any capital gain made as a result of this is declared.

If you close the company bank account today and have final accounts made up to today's date then the capital gain will be reported as at today. Any capital gain in excess of £11,300 would then be taxed at 10% when declared on your 2017/18 UK personal tax return. The actual company dissolution with Companies House takes place after this and has no bearing on when you report the gain for tax purposes.

There is no need for this to drag on into the next tax year or into when you have moved to NZ.