Closing LTD to go Perm - MVL question

[SomaTech]

I'm looking for some advice on closing my LTD company to go perm.

I emailed my accountant for the best course of action in closing my company to ensure I keep as much as possible.

I'll have around 95k in the company account by the time I close so was thinking it would go down the MVL route.

The accountant came back to say the rules around the TAAR legislation and same business activity haven't been specified whether it solely relates to setting up another LTD or whether it includes perm work too so I could be at high risk of HMRC disallowing this.

Is this the case?

From what I've read on these forums and online, an MVL seems to be the way to go when you've got a good bit over 25k and are moving from contracting to perm.

Using the working example found here - https://www.crunch.co.uk/knowledge-t...nd%20directors - It looks like the difference in around the amount I would have is about 12k, albeit I'd push a good bit into my pension if I was going down the non-MVL route, so it could cost a fair bit choosing the wrong method here

[WTFH]

Maslins
Are probably the best ones to speak to about it.

[RobScott]

I'm looking for some advice on closing my LTD company to go perm.

I emailed my accountant for the best course of action in closing my company to ensure I keep as much as possible.

I'll have around 95k in the company account by the time I close so was thinking it would go down the MVL route.

The accountant came back to say the rules around the TAAR legislation and same business activity haven't been specified whether it solely relates to setting up another LTD or whether it includes perm work too so I could be at high risk of HMRC disallowing this.

Is this the case?

From what I've read on these forums and online, an MVL seems to be the way to go when you've got a good bit over 25k and are moving from contracting to perm.

Using the working example found here - https://www.crunch.co.uk/knowledge-t...nd%20directors - It looks like the difference in around the amount I would have is about 12k, albeit I'd push a good bit into my pension if I was going down the non-MVL route, so it could cost a fair bit choosing the wrong method here

yeah, good link and advice.
''you may have to pay Capital Gains Tax or Income Tax' - great, just pay it and all gets sorted

[northernladuk]

From what I've read on these forums and online, an MVL seems to be the way to go when you've got a good bit over 25k and are moving from contracting to perm.

Only if you intend to stay perm and won't be jumping at the next Outside gig within 2 years. So many people said they'd stay perm and now posting on here how to get round the 2 years. Have to be sure of your decision and implications. You've started right and asking the right people. Just be sure this is long term and not just a stopgap.

[SomaTech]

Only if you intend to stay perm and won't be jumping at the next Outside gig within 2 years. So many people said they'd stay perm and now posting on here how to get round the 2 years. Have to be sure of your decision and implications. You've started right and asking the right people. Just be sure this is long term and not just a stopgap.

Yeah I would be looking to stay 2 years+ in this new role, if I take it. It's a move to an architect role from being a contractor doing dev work so I'm seeing it as career progression and maybe when I feel I've got enough experience, jump back into contracting.

My question was more around if my accountant was right, and going perm in the same line of work would breach the TAAR legislation?

[northernladuk]

Yeah I would be looking to stay 2 years+ in this new role, if I take it. It's a move to an architect role from being a contractor doing dev work so I'm seeing it as career progression and maybe when I feel I've got enough experience, jump back into contracting.

My question was more around if my accountant was right, and going perm in the same line of work would breach the TAAR legislation?

No it wouldn't. This page explains the details around it but the key takeaway is

Where there is a genuine non-tax motive for winding up the company, then condition D is not satisfied and the legislation should not apply.

You've explained quite clearly the motivation is not tax related so you are good.

Page is https://www.contractorweekly.com/tax...ke-loud-clear/

[Lance]

I'm looking for some advice on closing my LTD company to go perm.

I emailed my accountant for the best course of action in closing my company to ensure I keep as much as possible.

I'll have around 95k in the company account by the time I close so was thinking it would go down the MVL route.

The accountant came back to say the rules around the TAAR legislation and same business activity haven't been specified whether it solely relates to setting up another LTD or whether it includes perm work too so I could be at high risk of HMRC disallowing this.

Is this the case?

From what I've read on these forums and online, an MVL seems to be the way to go when you've got a good bit over 25k and are moving from contracting to perm.

Using the working example found here - https://www.crunch.co.uk/knowledge-t...nd%20directors - It looks like the difference in around the amount I would have is about 12k, albeit I'd push a good bit into my pension if I was going down the non-MVL route, so it could cost a fair bit choosing the wrong method here

£2k a year tax free dividends
£40k a year pension contrubtions
after 2 years you have got £11k left which you can simply strike off the company for.

Of take £2k a year, and put £33k a year into pension, leaving £25k to strike off after 2 years.

That way you are more tax efficient than MVL, without the cost, and without TAAR being a thing.

[Maslins]

The accountant came back to say the rules around the TAAR legislation and same business activity haven't been specified whether it solely relates to setting up another LTD or whether it includes perm work too so I could be at high risk of HMRC disallowing this.

Is this the case?

HMRC have been clear that going on the payroll of a business you have no personal connection with would not be caught.

http://www.chrismaslin.co.uk/wp-cont...e-requests.pdf

The above link is a slightly odd one...basically it was a standard response HMRC were giving to clearance requests re this at the time. Effectively always refusing to give clearance for the specific case asked about, but giving a general response. I can't recall where I originally found this, so apologies for linking to my own (very old and no longer used) blog, but the link itself is to a PDF of HMRC example letter.

Critical line is the final sentence of first paragraph on second page:
"Condition C will not be met where the individual is employed by an unconnected third party."

As long as the business you work for isn't one you have shares in, or is run by a close relative etc, so is an unrelated third party employing you, you're fine. Obviously the connection rules are to get around convoluted situations where perhaps husband and wife each with a company both liquidate, both set up new compmanies straight away, but work for the spouse's company rather than their own.

[SomaTech]

Thanks for all the feedback all.

Sounds like the MVL is the best way to go at the moment - I'm a fair few years away from retirement to dump it all in a pension

[ladymuck]

Thanks for all the feedback all.

Sounds like the MVL is the best way to go at the moment - I'm a fair few years away from retirement to dump it all in a pension

The point of a pension is to save while you're young so it has time to grow, giving you large pot when you stop working. The later you start topping up your pension, the worse your pot will be.

If you're already close to the lifetime limit then that's a different matter entirely.