Closing Ltd Company - Bit of a Mess & Advice Needed

[Quindi]

Hi Everyone - i am hoping for some advice and hopefully insight into anyone else who has faced a similar problem and how they went about it and costs they paid etc. I'll try and be specific as much as possible to try and get some specific advice or like for like experience.

I have been contracting for a number of years now and coincidentally my programme came to an end and i was offered a role in the Middle East (permanent - moving to non UK resident status) and with the IR35 changes i thought why not.

However, i have £400,000 in my Ltd company and unsure really how to get it out without paying a huge amount of tax?

I take approx £30,000 a year dividends as i have some properties and technically get income from those, plus basic salary of £8,000. My wife has only ever claimed low dividend levels when she genuinely helped me with the Ltd company so has not been using up to the tax thresholds etc.

I still have my Ltd company open even though i have started the new permanent role in the Middle East and not really sure what to do with it to try and get access to the money in an as much as possible tax efficient way? I am also worried that the Ltd company isnt trading and running down dividends for 10 years to lower the bank balance will obviously look suspect.

And not sure how i can increase my wife's involvement in the Ltd company given technically it is not trading at the moment (even though account and company is still active - just no trading transactions are going into it).

If anyone has practical guidance or has faced a similar issue with the moves from contracting to permie please share?

Very much appreciated.

Accountant stated ER was more applicable on lower amounts approx £30k balances and closing the company with £400k would lose all dividends allowances so tax liability would be huge.

[wattaj]

...Accountant stated ER was more applicable on lower amounts approx £30k balances and closing the company with £400k would lose all dividends allowances so tax liability would be huge.

I think that there may have been some confusion here and that you should seek the advice of a specialist MVL provider.

[MVLOnline] Holding post for that nice MVLOnline chap to drop by. [/MVLOnline]

[BlasterBates]

I would ask your accountant. If ER is not applicable, it seems like paying yourself dividends every year is the most tax efficient approach, even if the company is not trading it doesn't necessarily mean you can't do this.

[rootsnall]

If you are genuinely going to be non tax resident for next full tax year then you probably have scope to make a killing tax wise. It sounds like you should keep the company going into the next tax year and pay it all as dividends once you are offshore. But as mentioned you need specialist advice. The problem will come if you don't stay non tax resident for the full tax year. I had a similar thing yonks ago and it got messy.

[northernladuk]

Speak to Chris at MVLOnline to understand those options first. That is if he can put his glass of champagne down while steering his yaght in the Bahamas.

After that seek out specialist tax advice and understand that etc. Asking a bunch contractors about those figures isnt the way to go.

[ChimpMaster]

Sounds like you need a new accountant.

One that understands MVL/ER, or even better, one that understands non-resident UK tax.

[jamesbrown]

First, I would look to see how you’d be taxed on dividends in your new country of residence. If they are tax free, that is probably the route to go, providing you plan to be non-UK resident for at least five full tax years (otherwise you may be taxable on the full amount in the year you return). Failing that, I see no reason why you couldn’t take a capital distribution and then claim ER on your personal tax return, but you should speak to a specialist. Sounds like your current accountant is pretty clueless (e.g. is unaware of MVL) or has described the process for striking off, rather than MVL (now a 25k limit for striking off, as this is no longer covered by an ESC).

[pscont]

What James said.
However, check and see if you take dividend from UK company even in another country, do you have to pay Divi tax in UK. It is part of double taxation treaties between countries. E.g. Income from UK property is taxed in UK.
2. You as director must file satr. Not sure how to report Divi in this. Maybe some additional form to say you are not UK tax subject.

James, why the five years?

[jamesbrown]

What James said.
However, check and see if you take dividend from UK company even in another country, do you have to pay Divi tax in UK. It is part of double taxation treaties between countries. E.g. Income from UK property is taxed in UK.
2. You as director must file satr. Not sure how to report Divi in this. Maybe some additional form to say you are not UK tax subject.

James, why the five years?

It's anti-avoidance legislation surrounding temporary non-residence (since FA 2013, I think). It aims to stop you taking, say, a year out and receiving a capital or dividend distribution in a low-tax jurisdiction overseas and then returning to the UK. For the purposes of the anti-avoidance legislation, anything more than 5 years is considered non-temporary (and the 5 years doesn't necessarily have an intuitive calculation, IIRC). I believe it applies to both capital gains and dividend income. But don't just take my word for it, obviously, ask a specialist.

[jamesbrown]

Here's a link (covers income tax too):

HS278 Temporary non-residents and Capital Gains Tax (2019) - GOV.UK

Worth noting that any dividends paid from profits earned overseas during the period of temporary non-residence would be fine, but that isn't the discussion here.

distributions paid by close companies (or those that would be close, if they were UK resident) of which you are a material participator or their associate, in the case of distributions that are dividends, those out of trade profits arising in the temporary period of non-residence are not taxable - ‘Distributions’ includes dividend income received by a person abroad which you have power to enjoy, under the Transfer of Assets Abroad code (HS262)