Opening a new Ltd Co less than 2 years after MVL (but NOT claiming ER)

[abbyw]

Hi all,

I have closed my Ltd Company via MVL last year. My final distribution was in Dec 2020. I have not filed a self-assessment yet for FY 2020-21. I worked as a perm in a different company right after I closed my old Ltd Company.

I have just been offered an outside IR35 contract today. My question is, can I still open a NEW Ltd Company if I didn't claim ER on my previously closed Ltd Company?

Thanks in advance!

[Patrick@Intouch]

Yes, opening another company and carrying on the same trade or activity as the old one within 2 years of that company having been dissolved only affects your ability to treat the distribution from the old company as a capital gain.

You can open a new company and carry out the same or similar trade or activity but will have to declare all of the distribution from the old company as dividend income.

[Lance]

Hi all,

I have closed my Ltd Company via MVL last year. My final distribution was in Dec 2019. I have not filed a self-assessment yet for FY 2020-21. I worked as a perm in a different company right after I closed my old Ltd Company.

I have just been offered an outside IR35 contract today. My question is, can I still open a NEW Ltd Company if I didn't claim ER on my previously closed Ltd Company?

Thanks in advance!

ER is not the trigger.
Capital distribution is. I assume that if you MVLed then you did take capital so TAAR would apply.

[abbyw]

ER is not the trigger.
Capital distribution is. I assume that if you MVLed then you did take capital so TAAR would apply.

I did use MVL to close the company. At what point does it become a capital? Is it when I declared it on my Self Assessment? Or as long as I MVL'd it's already a capital gain?

[abbyw]

Yes, opening another company and carrying on the same trade or activity as the old one within 2 years of that company having been dissolved only affects your ability to treat the distribution from the old company as a capital gain.

You can open a new company and carry out the same or similar trade or activity but will have to declare all of the distribution from the old company as dividend income.

Ah so if I declare them as dividend income, it will be taxed as such. I haven't done calculations but I assume I would be a lot worse off tax-wise when it's a dividend.

[Lance]

I did use MVL to close the company. At what point does it become a capital? Is it when I declared it on my Self Assessment? Or as long as I MVL'd it's already a capital gain?

not sure about the finer legal points. But Patrick hinted that you can declare it as a dividend.
To be clear though, you cannot have a dividend from a company that's liquidated, or being liquidated. It would have to be done before as Directors declare and issue a dividend, whereas a liquidator doesn't. IANAL

What a lot miss is that if the company is struck off rather than liquidated there are no TAAR rules. Bit late for that now.
Bit late for many of the knee-jerk MVLs that are thinning out the herd .

[Lance]

Ah so if I declare them as dividend income, it will be taxed as such.

No it's free cash, tax free.......
/sarcasm

Of course it will be taxed as dividend.....

I haven't done calculations but I assume I would be a lot worse off tax-wise when it's a dividend.

No idea till you do the calculations....

[abbyw]

Just to double-check, WHEN are the 2 years for TAAR counted from? When the declaration of solvency is filed? On final distribution? Help clarifying this please.

[northernladuk]

Just to double-check, WHEN are the 2 years for TAAR counted from? When the declaration of solvency is filed? On final distribution? Help clarifying this please.

I would be when you declared would it not? Payment can happen anytime. Same as it is for dividends no?

[jamesbrown]

Condition C of the TAAR concerns carrying on the same or a similar trade or activity within two years of a capital distribution, so if you had two distributions, there will be a separate date for each one.

There is a school of thought that says the two-year rule has less than a literal interpretation. For example, if you've held a permie position that wasn't a sham to get around the TAAR, then there's a school of thought that says you could start a new company within 2 years. However, here be dragons IMHO, so you should get specialist advice and, even then, it's a risk.