Closing down my company

**ensignia** · 9 December 2021, 12:31

Why are you assuming that you'll never get an Outside role again?

The amount of people I know from my 10+ years of contracting who simply closed their LTD's down as soon as the changes came in, shows me that IR35 reform probably needed to happen.

**Maslins** · 9 December 2021, 12:42

Originally posted by JamApple View Post

In short my current situation is that I have been working in a inside ir35 role for over a year. I don't think the chances of finding a outside role is likely. I still have a LTD company which has been dormant for over a year. The following is my situation concerning my Tax/Business account:

- Business account has 33k
- Accountant has told me I am due to pay Corp tax (however after this i still have money left over after all debts have been paid off)

I have 2 options, either I can reopen my company (make it active i.e. non dormant) and I could withdraw dividends (no salary) whilst working on my PAYE role that I have. Was also thinking I could add my wife as director and get her to also take out dividends, till i've drawn out most of the funds. I can then make the company dormant in case i need it.

other option is to go for the business asset disposal relief, so i appoint a liquidator who charges me 3-4k and then I can take out all funds from my business account minus a 10% tax charge. this means the company will close and i can't open another one again in the same industry for 2 years (or so my understanding)

All aside, my question is which is the best option? lets assume that I wont be doing any outside ir35 roles and I want to to be able to maximise the amount I can take out, which option should I use? If the business asset disposal relief route is best then is there any liquidator you guys can recommend? I have heard MLV online being mentioned a few times.

How big is the CT liability? If it's >£8k, so you end up with <£25k final net assets, you can potentially close and get the beneficial tax treatment without the need for an MVL. Otherwise, if you're only a few grand above £25k, you/your accountant can likely find a way to get it below £25k to avoid liquidation costs.

If you anticipate being inside IR35 for the foreseeable future, I don't see the benefit in keeping your company ticking over. You'd have ongoing admin costs. If your inside IR35 work/salary is above £50k any dividends paid to you would suffer at least 32.5% personal tax. Gifting shares to your wife at this late stage just so she can get some of the existing retained earnings as dividends doesn't sit well.

**ladymuck** · 9 December 2021, 13:15

Maslins has it spot on (of course!). You need to know what your CT liability is. As you're not close enough your company's finances to know what that is, ask your accountant for an estimate. If they won't give that to you then you can get a rough idea by working out 19% of your profit.

Once you have that then everything else should become simple.

I wouldn't be paying for liquidation with net assets that close to the threshold.

**TheCyclingProgrammer** · 9 December 2021, 13:21

Even if you're slightly above the £25k threshold after accounting for all liabilities, you're probably only looking at around £1500 give or take a few hundred quid for a simple MVL, certainly not £3-4k. Assuming you quality for BADR, you'll be looking at around £12k tax free (CGT allowance) and 10% on the remainder. You should be able to work out if the cost of an MVL is worth the tax saving.

**northernladuk** · 9 December 2021, 13:30

Can I just check your terminology as it is a common mistake on here.

I still have a LTD company which has been dormant for over a year

Is it really dormant or are you not using it? To make a company dorman you need to do some things and can't use it again. Most people just don't use their company and think it's dormant but it's not. Which is it for you?

reopen my company (make it active i.e. non dormant)

You don't really re-open a company when coming out of dormancy.

Was also thinking I could add my wife as director and get her to also take out dividends, till i've drawn out most of the funds.

No you can't. Just the fact you state til you've drawn out the funds indicates you are getting the benefit from your wifes divis which isn't right. But that aside, adding your wife to a dormant company just to extract dividends is a perfect example of aggressive tax avoidance. There is absolutely no business reason to do this. It's purely a tax wheeze so it won't wash.

**JamApple** · 9 December 2021, 16:12

Originally posted by Maslins View Post

How big is the CT liability? If it's >£8k, so you end up with <£25k final net assets, you can potentially close and get the beneficial tax treatment without the need for an MVL. Otherwise, if you're only a few grand above £25k, you/your accountant can likely find a way to get it below £25k to avoid liquidation costs.

If you anticipate being inside IR35 for the foreseeable future, I don't see the benefit in keeping your company ticking over. You'd have ongoing admin costs. If your inside IR35 work/salary is above £50k any dividends paid to you would suffer at least 32.5% personal tax. Gifting shares to your wife at this late stage just so she can get some of the existing retained earnings as dividends doesn't sit well.

Thanks for your reply Maslins. Very informative.

My Corp tax due by December 2021 is 6k.

When you say that "you can potentially close and get the beneficial tax treatment without the need for an MVL" - what does this look like? what would I need to tell my accountant? Also i take it that the tax treatment is similar to if did the Business asset disposal relief (which i believe is 10%)

**JamApple** · 9 December 2021, 16:14

Originally posted by ladymuck View Post

Maslins has it spot on (of course!). You need to know what your CT liability is. As you're not close enough your company's finances to know what that is, ask your accountant for an estimate. If they won't give that to you then you can get a rough idea by working out 19% of your profit.

Once you have that then everything else should become simple.

I wouldn't be paying for liquidation with net assets that close to the threshold.

Thanks, for the input. my corp tax is 6K.

Hope you don't mind if I picked your brain but what would you do in my case with the company? - maybe i should have mentioned that I'm looking to purchase a property so would like to take out as much cash to help with a property deposit.

**JamApple** · 9 December 2021, 16:19

Originally posted by TheCyclingProgrammer View Post

Even if you're slightly above the £25k threshold after accounting for all liabilities, you're probably only looking at around £1500 give or take a few hundred quid for a simple MVL, certainly not £3-4k. Assuming you quality for BADR, you'll be looking at around £12k tax free (CGT allowance) and 10% on the remainder. You should be able to work out if the cost of an MVL is worth the tax saving.

Thanks,

that's good to know, I thought the 10% was charged to all that remains in the business account (once all liabilities have been collected).

**JamApple** · 9 December 2021, 16:26

Originally posted by northernladuk View Post

Can I just check your terminology as it is a common mistake on here.

Is it really dormant or are you not using it? To make a company dorman you need to do some things and can't use it again. Most people just don't use their company and think it's dormant but it's not. Which is it for you?

You don't really re-open a company when coming out of dormancy.

No you can't. Just the fact you state til you've drawn out the funds indicates you are getting the benefit from your wifes divis which isn't right. But that aside, adding your wife to a dormant company just to extract dividends is a perfect example of aggressive tax avoidance. There is absolutely no business reason to do this. It's purely a tax wheeze so it won't wash.

No problem, sorry should have made my first post more clear.

Regarding the dormant status - i asked my accountant to set it as dormant. So I would hope he did whatever he needed to do in order to do that. On a similar note, if i wanted to doublecheck can I tell from companies house website if it's dormant?

Also, Regarding 'opening' the company after it being 'dormant' i guess i wasn't sure of the correct terminology to use to say i want to make it 'active again' my bad!

Closing down my company