MVL question...

[sim2kuk]

I am likely to close my company in the new tax year, but may look to continue contracting and opening a new company. This obviously means that going down the Entrepreneurs Relief route is not the best idea. If I closed it in the new tax year, and then went on contracting through a new company with the basic salary as now, what would my approx take home from the closure of the company be if I had approx £94k in retained profit? I would assume that I probably won't need to take any additional dividends during the 2020/2021 tax year.

[Major Hassle]

I am likely to close my company in the new tax year, but may look to continue contracting and opening a new company. This obviously means that going down the Entrepreneurs Relief route is not the best idea. If I closed it in the new tax year, and then went on contracting through a new company with the basic salary as now, what would my approx take home from the closure of the company be if I had approx £94k in retained profit? I would assume that I probably won't need to take any additional dividends during the 2020/2021 tax year.

What did your accountant say, what do you understand you position to be from your own research....?

[Lance]

I am likely to close my company in the new tax year, but may look to continue contracting and opening a new company. This obviously means that going down the Entrepreneurs Relief route is not the best idea. If I closed it in the new tax year, and then went on contracting through a new company with the basic salary as now, what would my approx take home from the closure of the company be if I had approx £94k in retained profit? I would assume that I probably won't need to take any additional dividends during the 2020/2021 tax year.

If you can’t claim ER why would you close a company to simply open another?
Seems rather daft to me. Surely 7.5%, or 32.5% dividend tax is better than 20% or 40% CGT?
Or have I missed something?

[MrButton]

If you can’t claim ER why would you close a company to simply open another?
Seems rather daft to me. Surely 7.5%, or 32.5% dividend tax is better than 20% or 40% CGT?
Or have I missed something?

Isn’t higher rate CGT 20% without ER?

Therefore assuming your a higher rate tax payer £94k - £12k (CGT allowance) = £82k at 20% is £16400 tax. So take home £77,600.

Less the cost of MVL.

But maybe I’m way off?

[sim2kuk]

What did your accountant say, what do you understand you position to be from your own research....?

Accountant was asked last week and still not heard. I reckon £78k, but don't know if maths is correct.

[Lance]

Isn’t higher rate CGT 20% without ER?

Therefore assuming your a higher rate tax payer £94k - £12k (CGT allowance) = £82k at 20% is £16400 tax. So take home £77,600.

Less the cost of MVL.

But maybe I’m way off?

You’re right. It’s 10 and 20.

[sim2kuk]

If you can’t claim ER why would you close a company to simply open another?
Seems rather daft to me. Surely 7.5%, or 32.5% dividend tax is better than 20% or 40% CGT?
Or have I missed something?

I was always advised to open a new company every 3 years, mainly for stopping any IR35 issues coming back to bite you (as it's less likely that they will come after a liquidated company).

[Lance]

I was always advised to open a new company every 3 years, mainly for stopping any IR35 issues coming back to bite you (as it's less likely that they will come after a liquidated company).

Hmmmm.
Sounds more like a red flag to me....

Who advised you? A qualified legal expert?

[sim2kuk]

Hmmmm.
Sounds more like a red flag to me....

Who advised you? A qualified legal expert?

Nope, just someone who's been contracting a long time.

Just out of interest, how is closing a company and opening a new company a red flag (or even opening a second company before closing the old company some months later)?

[Lance]

Nope, just someone who's been contracting a long time.

Just out of interest, how is closing a company and opening a new company a red flag (or even opening a second company before closing the old company some months later)?

Closing a company and just opening another, purely for tax purposes....
GAAR.....

Prior to GAAR legislation I’d still say that it smells dodgy... loans from Isle of Man was never illegal, but lots of long time contractors told me it was great... how’s that working out.

You may be absolutely fine. Just doesn’t sit well with my risk appetite and morality.