Tax Efficient Way to close Ltd

[MrButton]

Hmmm....Why wouldn't TAAR apply in this case?

I believed the original post at face value. Because I thought you two were the same person.

[Craig@Clarity]

I believed the original post at face value. Because I thought you two were the same person.

I'm the original Craig. I'm not chatting with myself in the same thread...honest.

[craigy1874]

Hmmm....Why wouldn't TAAR apply in this case?

If the company is being dissolved by striking off (which is not a winding up), and the funds, being less than £25,000, are distributed in anticipation of that dissolution. CTA 2009, s 1030A.

The "winding up" of a company is a process that is carried out by a liquidator, under IA 1986, pt 4 (which never refers to "a liquidation", but always to "a winding up"). An "MVL" is actually an "MVWU" in the Act. Likewise with a "CVWU".

Insolvency Act 1986

If CTA 2009, s 1030A applies, then ITTOIA 2005, s 396B cannot.

So to summarise, if the closure of the company is not carried out by a liquidator, then the TAAR cannot apply.

[northernladuk]

I believed the original post at face value. Because I thought you two were the same person.

LOL. Confused me as well the other. Just wait until Craig@NixonWilliams Gorilla Alchemy comes on. Gonna get confusing then.

[New Modeller Army]

It's difficult to advise in situations like this as there's many more questions to be asked before you get an informed answer (see above comments). In general, however, there are several options for you to consider when you stop trading being

1. Keep it dormant (ticking over) in case you pick up a new gig
2. Voluntary strike it off
3. Go through compulsory liquidation or MVL

I would generally advise on keeping the company going for a few months after your current contract. If you go permie, don't like it, then you can at least fall back on your company to contract again. It'll be much more work to reverse the closure of your company than simply to hold onto it for a few months.

As you say, you only have cash in the company. Assuming you're eligible for ER, don't want to do IT contracting ever again, the £25k can be treated as capital for tax purposes. To be eligible for ER, you have to hold at least 5% of the shares with voting rights and have been a office holder and traded for at least a year. If you're closing to simply restart again, you won't get ER which then opens up the question as to why you would want to close this company down in the first place to then open up another one doing the same thing?!

Not entirely sure why you were advised to extend the company year end by 3 months though.

Whatabout if you're closing down your Ltd to continuing contracting permanently through a brolly?

[Craig@Clarity]

Whatabout if you're closing down your Ltd to continuing contracting permanently through a brolly?

Should be fine as we're not talking "Phoenixism"

[Alchemy Accountancy]

LOL. Confused me as well the other. Just wait until Craig@NixonWilliams Gorilla Alchemy comes on. Gonna get confusing then.

I agree with Craig!

Hope this helps
Craig

[silvys]

Should be fine as we're not talking "Phoenixism"

The wording is:
The individual receiving the distribution continues to carry on, or be involved with, the same trade or a trade similar to that of the wound-up company at any time within two years from the date of the distribution.

How can doing the same thing in a brolly not be considered to be involved in the same trade!!!

I would be grateful if anyone could provide a definitive answer on this, as the brolly route is something that I would consider ...but always assumed I would be caught by the above condition.

[northernladuk]

The wording is:
The individual receiving the distribution continues to carry on, or be involved with, the same trade or a trade similar to that of the wound-up company at any time within two years from the date of the distribution.

How can doing the same thing in a brolly not be considered to be involved in the same trade!!!

I would be grateful if anyone could provide a definitive answer on this, as the brolly route is something that I would consider ...but always assumed I would be caught by the above condition.

There is no definitive answer at the moment. We've had comments that it should be OK.

In my mind your trade was providing consultancy services. Under a brolly you are an employed (job title) so not quite the same trade. But I don't believe there is anything in writing to say the move from PSC to brolly is 100% safe.

[Alchemy Accountancy]

The wording is:
The individual receiving the distribution continues to carry on, or be involved with, the same trade or a trade similar to that of the wound-up company at any time within two years from the date of the distribution.

How can doing the same thing in a brolly not be considered to be involved in the same trade!!!

I would be grateful if anyone could provide a definitive answer on this, as the brolly route is something that I would consider ...but always assumed I would be caught by the above condition.

I checked this with the HMRC for somebody when they first introduced the TAAR, at that point they said it was fine to continue the same thing through a brolly. However, that was several years ago, they could have changed their mind since then and I don't have a call reference or notes about the clients circumstances, having changed job twice since then.

The best thing you can do is to explain your plans to your accountant (where there is a professional relationship, and not strangers from the internet), they might then put in a similar call for you.

Looking at you post history, it looks like you were considering doing something similar in 2013, and I gave some advice at that point - out of interest, is this the same company as you were talking about back then or another one?