ER and going back to work as a sole trader.

[Lockhouse]

Hi,

I'd appreciate some input here.

I ceased trading as a limited company in Jan 2021 and I took ER mostly as an upfront payment. The company was officially finally liquidated in May 2022 according to Companies House.

I went perm Feb 2021-Nov 2021 and then fully retired - still am.

I've unexpectedly been offered a part-time contract which I'm minded to take. Same line of business. This would be as a self-employed trader, non-limited company basis.

Can I do this without it rocking the previous BADR boat? (bearing in mind in that time I've gone Ltd->Perm->Retired).

TIA.

[jamesbrown]

Answering your question directly, no. Self employment is a continuation of your earlier trade.

That said, the 2-year rule in the TAAR applies to each distribution separately, so 2 years from January 2021 is January 2023.

In other words, the worst you may be risking is a close look from HMRC, rather than a significant tax loss.

But this is the same old story, repeated over and over again here.

No one ever expects to trade again after their MVL. Yeah. Best to think about it more carefully at the time.

[jamesbrown]

Oh, and BTW, it has nothing to do with ER/BADR (beyond increasing the amount avoided), the TAAR is anti-avoidance in relation to a capital distribution, fullstop.

[Lockhouse]

Answering your question directly, no.....

Much appreciated. I think I'll get my dates sorted then give HMRC a call. Best to be upfront.

[jamesbrown]

Much appreciated. I think I'll get my dates sorted then give HMRC a call. Best to be upfront.

No problem. I doubt you'll find anyone there with the first clue about the TAAR and, in any case, they cannot offer tax advice.

But it does apply in relation to each distribution so, as long as you're 2+ years since the big/first one, the risk is mitigated. Arguably, it would be much better to wait until two years after the second/last one, but that's your call.

Maslins May have some further thoughts for you.

[Lockhouse]

No problem. I doubt you'll find anyone there with the first clue about the TAAR and, in any case, they cannot offer tax advice.

But it does apply in relation to each distribution so, as long as you're 2+ years since the big/first one, the risk is mitigated. Arguably, it would be much better to wait until two years after the second/last one, but that's your call.

Maslins May have some further thoughts for you.

My primary distributions were made in May 2021 so in theory TAAR would apply. However, with everything I've been through I think I've got a case for TAAR not applying due to what is known as "Condition D - Intent". The intent was not to gain a tax advantage but to go perm. When that didn't work out I retired for over a year.

From their own website: "HMRC can only displace this self-assessment where the individual’s decision is not reasonable."

I hate it when it's not black and white.

[jamesbrown]

My primary distributions were made in May 2021 so in theory TAAR would apply. However, with everything I've been through I think I've got a case for TAAR not applying due to what is known as "Condition D - Intent". The intent was not to gain a tax advantage but to go perm. When that didn't work out I retired for over a year.

From their own website: "HMRC can only displace this self-assessment where the individual’s decision is not reasonable."

I hate it when it's not black and white.

I would definitely wait until after May otherwise you're really asking for trouble. Condition D is highly subjective and there's little case law to help. The guidance/examples offered by HMRC all revolve around intuitively obvious situations, such as someone running a gardening business and then retiring and doing the occasional side-job on a back-garden. That is not the situation you describe. You're going to be trading again, much like before (edit: retiring for a year does count in your favour, but it's still subjective).

[Lockhouse]

I would definitely wait until after May otherwise you're really asking for trouble. Condition D is highly subjective and there's little case law to help. The guidance/examples offered by HMRC all revolve around intuitively obvious situations, such as someone running a gardening business and then retiring and doing the occasional side-job on a back-garden. That is not the situation you describe. You're going to be trading again, much like before (edit: retiring for a year does count in your favour, but it's still subjective).

This isn't going to work then. AIUI Working via an umbrella would be OK though?

[eek]

This isn't going to work then. AIUI Working via an umbrella would be OK though?

Yep you are an employee so not in business.

[jamesbrown]

This isn't going to work then. AIUI Working via an umbrella would be OK though?

Yes, fine, as eek says.

Ultimately, it depends on your risk tolerance, i.e., how well you feel you could argue that avoiding tax was not one of the main motivations, since you were aiming to go permie and/or retire. Your situation certainly isn't egregious, you obviously weren't engaged in shenanigans. On the other hand, why risk it when you can use an umbrella for a few months and then restart your trade once the risk is mitigated? You can always dump money into your pension in the mean time. The problem with the TAAR is that elements of it are very broadly drawn and seriously subjective and it's essentially untested for contractors, so it isn't as though you're going to find definitive advice, hence the need for some caution.