Moving away from the UK, withdrawing dividends and closing company

[zerosum]

Follow-up question here. What if one moves abroad and liquidates, rather than taking dividends. E.g. tax residency established abroad; do MVL; receive distribution. If one moved back to the UK within 5 tax years, would one pay CGT on this with BADR (the artist formerly known as ER)?

To answer my own question, it seems that if one liquidates a company while non-resident and one suspects one may return to the UK within 5 years (or there are circumstances which could make an emergency return possible) and therefore be treated as temporary non-resident, it is possible to file a protective claim with HMRC and ask for BADR; the lifetime limits etc. will be determined by when the disposal took place and not when the capital gains charge arises. There is a time limit for doing this. The claim should be made by the first anniversary of 31 January following the tax year of the liquidation. E.g. liquidate by the end of the calendar year 2020 (tax year 20-21) -> claim must be made by 31 January 2023. I think a particular form is needed for this and not the SATR.

[NowPermOutsideUK]

This is a very interesting thread but if you have done MVL and paid the 10% tax isnt that the end of it? If you stay in UK or move abroad isnt that the same and makes no difference at all?

I dont understand why you complicate MVL and CGT

[zerosum]

This is a very interesting thread but if you have done MVL and paid the 10% tax isnt that the end of it? If you stay in UK or move abroad isnt that the same and makes no difference at all?

I dont understand why you complicate MVL and CGT

If the distribution happens once you're tax resident elsewhere, the 10% would not be applicable because it's a UK relief. You'll pay capital gains according to where you're tax resident, in some cases this is lower in some higher than in the UK. This is fine and well if you remain outside the UK for five years; if you anticipate that you might return beforehand you can elect to pay the 10% and tell HMRC, and there is a deadline to take this decision.

[je vais a la plage]

Great thread. If I understood correctly, the best strategy (assuming destination country has zero dividend, capital gains and foreign income tax) seems to be:

- Draw x director salary (Depend on the income tax allowance in the destination country. Not sure how to report this on the UK payroll)
- Draw (50,000 - x) dividends
- Distribute remaining capital under MVL
- Claim ER if returning to UK within 5 years.

The route where one distributes dividends to a foreign company seems like an alternative, although not sure how one would go about doing this. Does anyone look a bit further into this? I asked a friend (who's an accountant), and she just rolled her eyes at me.

[NowPermOutsideUK]

I do like zerosums attention to detail and creativity

I can tell you what I am thinking as I am in a similar position

1) Have a large warchest in UK which remains in company as retained profit
2) Warchest held in property so not easily liquidated

I have residency in Switzerland with a full time salaried job so definitely am non uk resident and have been this way for a few years. This means that CGT in Switzerland is tax free but dividends is taxable as income.

The plan is to sell UkLtdA to UKLtdB (both being owned by me) to cystralise the CG and avoid paying tax.

If I sell UkLtdA then this is a CG and I can take out the entire value of the company. UkLtdB will then be funded by a directors loan from me to purchase UkLtdA.

Paying yourself PAYE and dividends at basic rate wont work for me as I have a bit of rental income from privately help personal property.


*Footnote: The level of detail that so called wealth advisers or tax advisers have is frankly shocking and a lot of this has been identified from my own research. UK accountants seem to now only want to fill in forms rather then provide proper tax planning advice with different scenarios. There is a real niche for tax planning which seems to be missing in the market

[Fred Bloggs]

I do like zerosums attention to detail and creativity

I can tell you what I am thinking as I am in a similar position

1) Have a large warchest in UK which remains in company as retained profit
2) Warchest held in property so not easily liquidated

I have residency in Switzerland with a full time salaried job so definitely am non uk resident and have been this way for a few years. This means that CGT in Switzerland is tax free but dividends is taxable as income.

The plan is to sell UkLtdA to UKLtdB (both being owned by me) to cystralise the CG and avoid paying tax.

If I sell UkLtdA then this is a CG and I can take out the entire value of the company. UkLtdB will then be funded by a directors loan from me to purchase UkLtdA.

Paying yourself PAYE and dividends at basic rate wont work for me as I have a bit of rental income from privately help personal property.


*Footnote: The level of detail that so called wealth advisers or tax advisers have is frankly shocking and a lot of this has been identified from my own research. UK accountants seem to now only want to fill in forms rather then provide proper tax planning advice with different scenarios. There is a real niche for tax planning which seems to be missing in the market

OK, I am not an accountant. What is the commercial purpose of those transactions?

[eek]

OK, I am not an accountant. What is the commercial purpose of those transactions?

There isn't one.

[Iliketax]

2) Warchest held in property

I wonder if that would make a difference?

[Fred Bloggs]

There isn't one.

Who's going to explain to him/her?

[NowPermOutsideUK]

OK, I am not an accountant. What is the commercial purpose of those transactions?

Does there really need to be a commercial purpose? Might more share capital be the answer

The reason for doing this is obviously to sell shares held in my personal name to the new company and cyrstailse the gain.

Another answer could be to hold my shares in a ltd structure for limited liability protection.

These shares are not being sold at an undervalue but are being sold to a connected party. Does there really need to be a commercial purpose?