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Help MVL company and opening another one

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    Help MVL company and opening another one

    Hi,

    I've just recently closed my limited company via MVL because I've been inside IR35 for the last 6 months.

    Recently, I found a client in the US, that is willing to pay me $1K daily. It's about 1-1.5 years worth of work.

    I'm a bit of dilemma here whether to open a new limited company or be a freelancer (self-employed), aware that once you've closed your ltd company, you cannot open another one under the same trading activity.

    The client is actually a friend of mine who became successful with his crypto business now wants to build a cloud infrastructure.

    Any advice or help on this. Thanks. It's greatly appreciated.

    #2
    did you take a capital distribution when you MVLed?
    If you did then you cannot start another company for two years without breaching TAAR rules.

    You might be able to pay tax on your distribution as dividends rather than capital and start another company. Perhaps. Seek advice from the liquidator/accountant/legal counsel.

    Self-employed would be an option if your friend is willing. Just be aware that PI might be more expensive and you won't have limited liability if your 'friend' does decide to make a claim against you. So try and keep any contract under UK jurisdiction.
    Last edited by Lance; 6 September 2021, 09:46.
    See You Next Tuesday

    Comment


      #3
      I have taken the 10% ER relief and took distribution.

      Ok, in this case, I may just stick to it as freelancer/self-employed instead of through a ltd company.

      Comment


        #4
        Originally posted by stockguy View Post
        I have taken the 10% ER relief and took distribution.

        Ok, in this case, I may just stick to it as freelancer/self-employed instead of through a ltd company.
        makes sense. EDIT: No it doesn't. I got it wrong. Ignore this.

        As a point of note, ER makes no odds. It is the distribution of capital that matters. ER is (was, it's BADR now) just a personal relief for capital gains tax.
        Last edited by Lance; 6 September 2021, 11:48.
        See You Next Tuesday

        Comment


          #5
          Legally you can start another similar business, the TAAR doesn't stop that, it just means HMRC may have grounds to challenge the tax treatment of the distributions from the liquidation. The argument being your business never really ceased, you just took a break, so should be taxed on that basis (dividends for funds via the liquidation).

          Be warned that setting up as a sole trader doesn't necessarily keep you safe from the above. If it's a similar business, HMRC can challenge it no differently if the new one is a sole trader rather than Ltd Co.

          You're not necessarily caught just by virtue of providing a similar service, but the onus would be on you to demonstrate commercial reasons for your decisions, rather than just having lots of cash in the company and wanting the tax breaks whilst continuing to do the same thing.

          Unless you went via some kind of umbrella company that was happy invoicing your international client and paying you via PAYE I don't think there's an easy way to be guaranteed safe from the TAAR if you do this new work. If your liquidation distributions weren't _that_ big in the grand scheme of things, you might want to risk it. If they were huge (hence tax at stake also huge), perhaps an umbrella that was happy to take this on would make sense, or avoid this work completely and stick to PAYE roles for a while.

          Comment


            #6
            If you start another company or set up as a sole trader, you are absolutely asking for trouble w/r to the capital distribution being reassessed as a dividend distribution because you are almost certainly planning to use your previous expertise in your new work, so you are almost certainly engaged in the "same or a similar trade or activity". Trade is clearly defined and you would breach that one with either a new Ltd or as a sole trader. The words "same or a similar" mean that the scope is broad - if you were previously working in IT and are continuing in IT, that would be a problem. Relying on tax not being a primary motivation in these circumstances is, er, brave, even with the updated guidance from HMRC that, essentially, they need to prove their argument rather than the other way around.

            This isn't a situation where you intended to retire and then some former client offered you work, unsolicited, which might be argued to not undermine the position at the time the MVL was pursued; you are clearly still actively working, actively looking for clients ("Recently, I found a client in the US...").

            No question to my mind, umbrella for you, unless you're very brave.

            Comment


              #7
              Originally posted by stockguy View Post
              I have taken the 10% ER relief and took distribution.

              Ok, in this case, I may just stick to it as freelancer/self-employed instead of through a ltd company.
              Nope, makes no difference. That is still a "trade" (let alone an "activity").

              Originally posted by Lance View Post
              makes sense.
              Nope, it doesn't make sense.

              Comment


                #8
                Originally posted by jamesbrown View Post

                Nope, makes no difference. That is still a "trade" (let alone an "activity").



                Nope, it doesn't make sense.
                OK. Good point well. I shall edit my comment.
                See You Next Tuesday

                Comment


                  #9
                  Taking into account all comments / advice above. And I appreciate everybody's input.

                  Looks like I may have to do this via an umbrella company.

                  Comment


                    #10
                    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.
                    'CUK forum personality of 2011 - Winner - Yes really!!!!

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