Cash in Company - Closure vs MVL

[shb]

Hi, I have some cash in LTD company and exploring options whether I keep company running for some time and take out basic salary i.e. 12.5. In this case, expenses will be 800 per annum (accounting cost). If I go with MVL route then expenses around 1500 + Income tax (which is around 10% of total amount - ER). Given scarcity of outside roles, I am not sure whether I can find any soon. Please can you share thoughts on it.

[Lance]

Hi, I have some cash in LTD company and exploring options whether I keep company running for some time and take out basic salary i.e. 12.5. In this case, expenses will be 800 per annum (accounting cost). If I go with MVL route then expenses around 1500 + Income tax (which is around 10% of total amount - ER). Given scarcity of outside roles, I am not sure whether I can find any soon. Please can you share thoughts on it.

how much $$$ in the bank?

[northernladuk]

Have you asked your accountant? Any reasonable sized account will have no doubt seen all the options used depending on circumstances. There will be undoubtedly many who just shut down and MVL's. I'll be some of them wish they hadn't as they are stuck with brollys even for outside gigs. Some kept it open awhile and shut, later, other still working brolly while the company chugs on.

You are best speaking to the accountant as you can furnish him with the exact details of your situation, which we don't have. You don't even tell us what cash you've got so can't even advise if MVL or emptying is an option.

Your accountant can also advise your tax position if you go perm. Taking a wage from the LTD when you hit higher rate is very inefficient so not really an option either.

Get some basic advice from them and then come back with some more specific questions. We can't provide anything meaningful with so little information.

[shb]

Thanks for your note. I have around 60K.

[Lance]

Thanks for your note. I have around 60K.

you might want to consider getting it below £25k and going for a voluntary strike off than a liquidation. No TAAR rules. No liquidators

[Maslins]

The drip feeding of funds over a couple of years only tends to be viable if you'd otherwise have no/negligible other personal income. If the reality is there's plenty of work available to you, it's just all permie/inside IR35, then you're likely to be on a decent salary. Where that's the case, continuing to take salary and/or dividends from your Ltd Co won't tend to make sense from a tax perspective. An MVL would be more tax efficient. However, as NLUK suggests, if you do an MVL then a few months later get a great outside IR35 opportunity, you're not in a great position.

[Lance]

The drip feeding of funds over a couple of years only tends to be viable if you'd otherwise have no/negligible other personal income. If the reality is there's plenty of work available to you, it's just all permie/inside IR35, then you're likely to be on a decent salary. Where that's the case, continuing to take salary and/or dividends from your Ltd Co won't tend to make sense from a tax perspective. An MVL would be more tax efficient. However, as NLUK suggests, if you do an MVL then a few months later get a great outside IR35 opportunity, you're not in a great position.

indeed. But it does depend. With £60k in the bank, £35k to pension and £25k as strike off would be my move in that scenario. Depends how soon I need the cash really. I'm over 50 though.

[Maslins]

indeed. But it does depend. With £60k in the bank, £35k to pension and £25k as strike off would be my move in that scenario. Depends how soon I need the cash really. I'm over 50 though.

Typically people would be hoping to get CT relief on the pension contribution, so to get £60k net assets down to sub £25k, would need to be more like £44k gross company pension contribution (£44k net of 19% CT relief would lead to £35k-36k drop in net assets). That's above the annual allowance, so would need to either be £40k then combined with other things, or ensure there's pension contribution slack from prior year.

Also like you suggest your option means ~£22k after tax cash in your pocket now and a pension boost, rather than ~£53k after tax cash now. If OP's priority is eg a house deposit/similar then the MVL is more appealing.

Certainly another option for the OP to consider though. Plus I gather strike off situations aren't likely to be challenged under the TAAR rules (eg if OP wanted to revert to outside IR35 contracting in <2 years).