What to do with retained earnings

[css_jay99]

I have been thinking at MVL (thanks to cuk) as a way to get hold of retained earnings from Ltd Co. and starting afresh with a new company.

Under MVL and ER/BADR, will I only be pay a maximum of 10% tax on the capital distribution or it's still dependent on other PAYE income in the tax year?

[jamesbrown]

I have been thinking at MVL (thanks to cuk) as a way to get hold of retained earnings from Ltd Co. and starting afresh with a new company.

Under MVL and ER/BADR, will I only be pay a maximum of 10% tax on the capital distribution or it's still dependent on other PAYE income in the tax year?

You're either trolling or woefully misinformed but, either way, your plan won't work. It's called phoenixing and, yes, there is legislation that prevents it. If you continue the same or a similar trade or activity within two years of receiving any capital distribution (regardless of whether you additionally received BADR), then that distribution is liable to being reclassified as a dividend distribution (plus any penalties and interest owed).

[northernladuk]

I have been thinking at MVL (thanks to cuk) as a way to get hold of retained earnings from Ltd Co. and starting afresh with a new company.

Under MVL and ER/BADR, will I only be pay a maximum of 10% tax on the capital distribution or it's still dependent on other PAYE income in the tax year?

[Maslins]

I have been thinking at MVL (thanks to cuk) as a way to get hold of retained earnings from Ltd Co. and starting afresh with a new company.

Under MVL and ER/BADR, will I only be pay a maximum of 10% tax on the capital distribution or it's still dependent on other PAYE income in the tax year?

I'm afraid HMRC have already cottoned on to that plan and clobbered it. Perhaps Google "TAAR liquidation"/similar, and read what comes up. In short, you'd need to wait at least 2 years between liquidating Oldco and starting Newco, otherwise you'd lose the tax benefits.

Parking that aside and looking at your 2nd para in isolation, PAYE/other earnings are irrelevant for CGT calculations. Ie so doesn't matter if you're earning £20k/year or £200k/year in your day job, if you have a capital gain that qualifies for BADR, it'd just suffer 10% tax.

[css_jay99]

You're either trolling or woefully misinformed but, either way, your plan won't work. It's called phoenixing and, yes, there is legislation that prevents it. If you continue the same or a similar trade or activity within two years of receiving any capital distribution (regardless of whether you additionally received BADR), then that distribution is liable to being reclassified as a dividend distribution (plus any penalties and interest owed).

Misinformed. Started an inside IR35 role 4 months ago and considering that most roles I am seeing are Inside, I have been contemplating going permie for the right amount but not so sure I won't get the itch to go back contracting within 2 years.

Sounds like I would really need to commit to a permie role or umbrella for 2yrs for MVL to be an option.

[css_jay99]

stop slapping your face

[jamesbrown]

Misinformed. Started an inside IR35 role 4 months ago and considering that most roles I am seeing are Inside, I have been contemplating going permie for the right amount but not so sure I won't get the itch to go back contracting within 2 years.

Sounds like I would really need to commit to a permie role or umbrella for 2yrs for MVL to be an option.

Also bear in mind that you cannot keep your company around indefinitely in a non-trading state and still qualify for a capital distribution on closure.

Best option is probably to issue yourself dividends until you're sub £25k and then perform a simple strike-off (DS-01), which will also qualify for a capital distribution and BADR, mostly likely, but no TAAR to worry about.

[css_jay99]

I'm afraid HMRC have already cottoned on to that plan and clobbered it. Perhaps Google "TAAR liquidation"/similar, and read what comes up. In short, you'd need to wait at least 2 years between liquidating Oldco and starting Newco, otherwise you'd lose the tax benefits.

Thanks for the info, it does make for interesting read.

Also bear in mind that you cannot keep your company around indefinitely in a non-trading state and still qualify for a capital distribution on closure.

Best option is probably to issue yourself dividends until you're sub £25k and then perform a simple strike-off (DS-01), which will also qualify for a capital distribution and BADR, mostly likely, but no TAAR to worry about.

On subject of non trading, how much leeway do I have regarding additional SIC codes not relating to Contracting that will allow me to continue trading? I would like to continue (some form of ) trade with the ltd company. I have other ideas that could generate income ..... or result in a loss.

[WTFH]

On subject of non trading, how much leeway do I have regarding additional SIC codes not relating to Contracting that will allow me to continue trading? I would like to continue (some form of ) trade with the ltd company. I have other ideas that could generate income ..... or result in a loss.

Do you mean by that you'd like to get all the money out of one Ltd, close it down, open up a new Ltd with an SIC different to the current one, then use it to do similar to what you do today?
That wouldn't be a good idea.

[jamesbrown]

On subject of non trading, how much leeway do I have regarding additional SIC codes not relating to Contracting that will allow me to continue trading? I would like to continue (some form of ) trade with the ltd company. I have other ideas that could generate income ..... or result in a loss.

It isn't entirely clear what you're asking, but I refer you to WTFH's post above. There is no circumventing the TAAR as it applies to capital distributions w/r to you or a connected person being involved with "the same or a similar trade or activity", because it is drafted wisely to your shenanigans.