Closing LTD to go Perm - MVL question

[Snooky]

£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.

Excuse my lack of knowledge, but is this all completely above board? Can you have a company running with no income, where the director(s) have another full time job, yet get a huge pension contribution from their own company?

I'm about to go down the MVL route and I did ask my accountant about the option you mentioned (minus the divis) but he seemed to think HMRC would look unfavourably on it. I have no idea myself.

[jamesbrown]

Excuse my lack of knowledge, but is this all completely above board? Can you have a company running with no income, where the director(s) have another full time job, yet get a huge pension contribution from their own company?

I'm about to go down the MVL route and I did ask my accountant about the option you mentioned (minus the divis) but he seemed to think HMRC would look unfavourably on it. I have no idea myself.

There is a distinction between making a pension contribution from available funds and how it is treated as an expenses in relation to tax relief, for which the expense must be wholly and exclusively for business purposes. The latter is hard to argue if there is no ongoing trade. Likewise for salary payments. But if there is no trade, there is no profit, so no CT anyway. Where some care may be needed is carrying back a trading loss. In general, a company can do whatever it wants with its money (that is lawful), but tax relief is a separate thing and efficacy is yet another thing. Bear in mind that you can get tax relief at your marginal rate for personal contributions, for example.

[Maslins]

What jamesbrown said...but also bear in mind the £40k annual pension cap is for any/all pension contributions. If you're in an employed role, I'd imagine you & your employer will be putting money into a pension there. Whilst you likely could opt out, it's generally daft to do so. If your salary's chunky, the pension could be too. This may therefore greatly reduce what you can actually put in from your Ltd Co without breaching the threshold.

[SomaTech]

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.

Yeah I contribute a good percentage each month to my pension and have done since I started contracting so have a healthy pension for someone my age, I would think. I'm 25 years away from retirement at the earliest, so having the money just now would be a better option for me.

[zero7]

Rather than start a new thread I hope it’s ok to add to this one. I did an MVL for my limited company when I went perm back in January 2020. My first distribution was May 2021 and final distribution was in November 2021. Commencement of windowing up was March 2021, notice of final accounts to companies house was Feb 2022. Inland Revenue took ages to allow the company to pay my final distribution (Nov 2021). question I have is, when can I set-up a new limited company and start trading, its all a bit confusing. Any help or guidance is appreciated

[eek]

Rather than start a new thread I hope it’s ok to add to this one. I did an MVL for my limited company when I went perm back in January 2020. My first distribution was May 2021 and final distribution was in November 2021. Commencement of windowing up was March 2021, notice of final accounts to companies house was Feb 2022. Inland Revenue took ages to allow the company to pay my final distribution (Nov 2021). question I have is, when can I set-up a new limited company and start trading, its all a bit confusing. Any help or guidance is appreciated

Covered elsewhere but Nov 2023 - the TAAR rules are two years.

If the first distribution is the main one you could treat the November 2021 as a dividend and start in March / April 2023 but I’m not there would be a bit of a risk there.