Help MVL company and opening another one

[Maslins]

The trickle of these questions has definitely started and I reckon this is going to be a regular thing on here. We are only 6 months in an people are already suffering fall out from knee jerk company closures. Many people came on asking questions about MVL so there are going to be a lot that didn't consider future outside work. I feel a good sticky will be required soon.

You're right in a way...but these people are hardly in a terrible position. They got lots of cash out very tax efficiently, and generally just need to be careful about choosing PAYE/umbrella work for a couple of years. The only ones who will be worse off by this will be the high earners with low MVL amounts. Potentially for them the tax saving from the MVL funds might be outweighed by extra tax/NICs paid over the couple of years that follow. I expect the vast majority it will be the other way around.

All good for you tho NLUK, means fewer people competing for the outside IR35 opportunities for a while

[Lance]

All good for you tho NLUK, means fewer people competing for the outside IR35 opportunities for a while

thinning out the herd

[northernladuk]

You're right in a way...but these people are hardly in a terrible position. They got lots of cash out very tax efficiently, and generally just need to be careful about choosing PAYE/umbrella work for a couple of years. The only ones who will be worse off by this will be the high earners with low MVL amounts. Potentially for them the tax saving from the MVL funds might be outweighed by extra tax/NICs paid over the couple of years that follow. I expect the vast majority it will be the other way around.

All good for you tho NLUK, means fewer people competing for the outside IR35 opportunities for a while

That's true. I did think there will be more of the latter than the former though. Outside gigs are still around so if they did a year and a half outside gigs but had to go through brolly I would have thought they would be losing quite a chuck of money they could have had if they'd held off shutting the LTD just because they got one inside gig. Will be interesting to see how it pans out.

And it would be nice to have less competition, but they can still take the outside gigs, just via a brolly so competition is the same

[Maslins]

I did think there will be more of the latter than the former though. Outside gigs are still around so if they did a year and a half outside gigs but had to go through brolly I would have thought they would be losing quite a chuck of money they could have had if they'd held off shutting the LTD just because they got one inside gig.

You got me thinking...obviously we'll never know full stats for all cases, but thought I'd run some example simplified numbers:
- per this IR35 calculator, with £500/day rate, difference between inside and outside is give or take £1k/month, so £24k over 2 years.
- I'd say a fairly average MVL pot from what we see might be £100k. Again oversimplifying if we say that's 10% on £90k (so £9k tax via MVL) vs 32.5% on £100k (so £32.5k tax via dividend), you're looking at £23.5k difference there.

No planning from me that the first numbers I plumped on ended up with broadly the same figure. Maybe the above might be a handy rough guide for people though. £500/day & £100k pot end up broadly equivalent. If your daily rate is higher and/or MVL pot is lower, you're better off not liquidating, stick with the outside IR35 contracts. If your daily rate is lower and/or MVL pot is higher (or simply you can't get any outside IR35 gigs and don't see that changing in the near future) then an MVL looks sensible.

[eek]

You got me thinking...obviously we'll never know full stats for all cases, but thought I'd run some example simplified numbers:
- per this IR35 calculator, with £500/day rate, difference between inside and outside is give or take £1k/month, so £24k over 2 years.
- I'd say a fairly average MVL pot from what we see might be £100k. Again oversimplifying if we say that's 10% on £90k (so £9k tax via MVL) vs 32.5% on £100k (so £32.5k tax via dividend), you're looking at £23.5k difference there.

No planning from me that the first numbers I plumped on ended up with broadly the same figure. Maybe the above might be a handy rough guide for people though. £500/day & £100k pot end up broadly equivalent. If your daily rate is higher and/or MVL pot is lower, you're better off not liquidating, stick with the outside IR35 contracts. If your daily rate is lower and/or MVL pot is higher (or simply you can't get any outside IR35 gigs and don't see that changing in the near future) then an MVL looks sensible.

Surely if you've taken a lot of cash out via MVL, the best approach if you found yourself in an contract via an umbrella would be to maximise your pension contributions which would have a decent impact on those totals.

[ladymuck]

Surely if you've taken a lot of cash out via MVL, the best approach if you found yourself in an contract via an umbrella would be to maximise your pension contributions which would have a decent impact on those totals.

That's assuming they didn't spunk it on a lambo

[Lance]

That's assuming they didn't spunk it on a lambo

now there's an image

[Maslins]

Surely if you've taken a lot of cash out via MVL, the best approach if you found yourself in an contract via an umbrella would be to maximise your pension contributions which would have a decent impact on those totals.

Depends whether people need the money now or not. You're right though, there will typically be choices for people, that can help mitigate their tax bills. I guess your comment (inadvertently or otherwise) is another nudge towards MVLs being a good option, even if you want to continue working in the same field. Ie nothing to stop someone:
- trading for a few years as a Ltd Co contractor,
- have a pension scheme set up, but make negligible contributions to it,
- modest dividends too, hence creating a large war chest,
- MVL to get that out tax efficiently,
- continue working, but via an umbrella, maxing pension contributions (with plenty of brought forward allowances from previous few years),
- live off the MVL proceeds whilst your taxable salary (ie non pension bit from the umbrella) is very modest.

Realistically I doubt many people planned the above in advance, and with the risk of tax rules changing regularly I'm not advocating it as a sensible strategy to start to implement now...but does seem like the above would be safe from TAAR (as legally you're just an employee post liquidation), and would do well to minimise tax liabilities across the board. So for anyone in this position now, potentially including the OP, assuming they didn't "spunk on a lambo" () their MVL proceeds, it could be a good option.

[stockguy]

Upon further research there are many startups now that can potentially deal with my situation.

- Remote
- Deel
- Bitwage

I hope they can handle U.K. taxation.

[northernladuk]

Very interesting stuff, particularly the example and the insight in to what people are MVL'ing. I was basing it on a couple of threads we have where people had 50 to 75k in but obviously there will be many with more. The MVL looks a lot more attractive than I thought and useful to have the numbers so people can make an balanced decision rather than just closing it because they've got their first inside gig and not thinking beyond that.