MVL Ltd Co. > Umbrella Co.

[lambretta008]

Hi,

Looking for advice on MVLing Ltd Co and switching to an Umbrella Co.

The Ltd Co is currently contracted outside of IR35. Client has provided written SDS and the CEST confirms contract sits outside IR35. Current contract finishes end of Nov 2023.

I'm thinking of MVLing the Ltd Co this current tax year due to nearing retirement (62) and because I'm wary BADR may be tweaked with the next Govt. When the current contract expires at the end of Nov and if the MVL process is started immediately (i.e. finalizing company accounts, de-registering for VAT etc.), could I contract with the same client under an Umbrella Co. with a new contract starting beg. Dec 2023 even though the MVL process and its first disbursements wouldn't have yet been finalized / declared? I'm aware it's likely the 2nd disbursement will fall into the next tax year.

BTW, I'm also aware of the tax hit going under an umbrella Vs Ltd Co. plus no claims for expenses allowed.

TIA

[jamesbrown]

In principle, working through an umbrella post MVL is not carrying on the same or a similar trade or activity, as defined in the TAAR, since an umbrella employment doesn't constitute a trade or a relevant activity, which has been clarified by HMRC. At the same time, continuing the same activity with the same client may be pushing your luck. If I were HMRC, I would consider that a continuation of the same activity, but there is no relevant case law.

The safest approach would be to continue as normal and then MVL and retire. It's possible that a Labour gov't might increase CGT or change BADR, but it's doubtful and it won't be very soon.

[Lance]

In principle, working through an umbrella post MVL is not carrying on the same or a similar trade or activity, as defined in the TAAR, since an umbrella employment doesn't constitute a trade or a relevant activity, which has been clarified by HMRC. At the same time, continuing the same activity with the same client may be pushing your luck. If I were HMRC, I would consider that a continuation of the same activity, but there is no relevant case law.

The safest approach would be to continue as normal and then MVL and retire. It's possible that a Labour gov't might increase CGT or change BADR, but it's doubtful and it won't be very soon.

Assuming a GE next May, the earliest Labour would do a CGT change would be for April 2025 onwards. And they would also risk huge capital flight if they did that, for not a huge amount of gain.
BADR could possibly get scrapped, but again it's not a lot of gain as lifetime BADR is capped at £1m anyway, so it only really impacts small businesses (so I guess it's likely to happen)