Contractor (ltd) considering umbrella - What to do with limited company

[SBK1972]

Hi all,

If post Apr 2020 I need to go via an umbrella, what do I do with my limited company ? Does closing it depend on whether I stay with an umbrella for a long time ? I wont have any other `opt out` contracts running at the sametime, and my main one will be `opt in` and via umbrella, so having a limited company will just burn cash i.e. accountants, insurance, etc etc.

If I go via an umbrella do I now become an employe of 2 companies, my ltd, and the umbrella ? My wife is a director of my company so what happens with her ?

I have 75K in my company, so looks like I will need to pay £2K to close it, some sort of ER tax can be deducted, and then captial distr.

Any advice gladily recieved.

SBK

[Patrick@Intouch]

Hi,

You could close your company through MVL and apply ER to the capital gain provided you meet the criteria AND don't return to carrying on the same, or a similar trade or activity through another PSC, partnership or self-employment vehicle in the two years following the liquidation of your company.

You could also keep the company in an inactive state while you work through an Umbrella or take on a permie role. This may be more suitable if you're not sure how long that will last or whether you'll return to contracting through a PSC in the next 24 months.

We help our customers with this by offering our Freeflex option. This allows customers to switch between operating through their PSC and using an Umbrella solution smoothly and without charging additional fees. We continue to file statutory returns for the company during times when customers use the Umbrella meaning that when they are ready to switch back, the company is live and ready to go without any admin catchup!

[SBK1972]

Hi,

You could close your company through MVL and apply ER to the capital gain provided you meet the criteria AND don't return to carrying on the same, or a similar trade or activity through another PSC, partnership or self-employment vehicle in the two years following the liquidation of your company.

You could also keep the company in an inactive state while you work through an Umbrella or take on a permie role. This may be more suitable if you're not sure how long that will last or whether you'll return to contracting through a PSC in the next 24 months.

We help our customers with this by offering our Freeflex option. This allows customers to switch between operating through their PSC and using an Umbrella solution smoothly and without charging additional fees. We continue to file statutory returns for the company during times when customers use the Umbrella meaning that when they are ready to switch back, the company is live and ready to go without any admin catchup!

Hi Patrick,

so, it sounds like I need to ask myself what I plan to do in the future. If the `opt in` role is for a year and afterwards if I plan to go for `opt out` roles. The current `opt in` role could last for 3 years, and if that is the case sounds like I need to close off my company.

If I keep my ltd company going, although doormant, would I still need my accountant to submit my books / account costs ? Do i still need employer insurance ? IPSE insurance ? What about my wife and her shares ?

Sounds like the best route is to close it down.

SBK

[GhostofTarbera]

Have all your contracts been outside so far ? If you continue in same role and suddenly go inside - prepare HMRC to come calling and class you inside for past projects


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[Paralytic]

If I keep my ltd company going, although doormant, would I still need my accountant to submit my books / account costs ? Do i still need employer insurance ? IPSE insurance ? What about my wife and her shares ?

You're already paying an accountant - you should ask them this.

But, yes, while the company is alive (whether "dormant" or not), it will still incur fees (unless your accountant decides to do otherwise). Only you can decide if you want to keep insurances/memberships alive based on your risk appetite.

If you close the company, the shares go away.

If you do close it, review the many threads here on the best way to extract your £75K in the most tax efficient way: pension contributions, dividends, MVL with Entrepreneurs Relief. If you can get the balance below £25K with pension contributions and dividends, you may not need an MVL.

[Maslins]

My general view would be to keep the company ticking over a short while, until you're more confident of the future of your umbrella role. If 3 months in you're happy with them, they're happy with you, and you think you'll be there a year plus, I'd suggest closing (probably via an MVL based on numbers quoted) would make sense.

[SBK1972]

My general view would be to keep the company ticking over a short while, until you're more confident of the future of your umbrella role. If 3 months in you're happy with them, they're happy with you, and you think you'll be there a year plus, I'd suggest closing (probably via an MVL based on numbers quoted) would make sense.

Thanks for your help guys. Yes obviously I have an accountant and have asked him the same question but his reply was confusing and he literally charges me per a minute :-) I find this group / forum far more informative, helpful and I tend to wise up here then Im in a better position to discuss with him.

SBK

[GhostofTarbera]

My general view would be to keep the company ticking over a short while, until you're more confident of the future of your umbrella role. If 3 months in you're happy with them, they're happy with you, and you think you'll be there a year plus, I'd suggest closing (probably via an MVL based on numbers quoted) would make sense.

If I was HMRC any one man band company that was requesting an MVL early next year - would go right to the top of my IR35 investigations list

Shooting fish in a barrow


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[Maslins]

If I was HMRC any one man band company that was requesting an MVL early next year - would go right to the top of my IR35 investigations list

Shooting fish in a barrow

*barrel?

I personally don't think you're right on this. I've explained why in another thread recently, but in short, it's not worth their while. Lots of effort, for individually modest gains (at best).

[dx4100]

*barrel?

I personally don't think you're right on this. I've explained why in another thread recently, but in short, it's not worth their while. Lots of effort, for individually modest gains (at best).

Isn't every IR35 win for HMRC in the end modest gains (actually tiny) in regards to the money raised from that investigation...

The win for HMRC has always been a mixture of forcing / scaring people in Umbrellas - their weapon for this are investigations. Regardless if they win or lose they create fear by doing investigations. And that tax take is much more than modest gains by forcing / scaring thousands of contractors into umbrellas.