7 month holiday/Leave

[Duke]

I’m a month away from completing my first year in contracting (Outside IR35). I have turned down a contract renewal as my wife and I have planned to take 7 months out for a world trip.

I asked my accountant at SJD to advise me what I should do with managing the business account and payments to myself. The accountant suggested I carry on paying myself my minimum salary but not to withdraw any dividends whilst im away.

I'm not 100% sure on this, is this what other contractors do if they take a few long months out? I thought it would have worked the other way round, Stop PAYE payments for unpaid leave and allowed to withdraw dividends. How does this all tie into staying outside IR35?

[r0bly0ns]

It has nothing to do with IR35, IR35 is for a contract, not for a business.



Dividend's are shares of profit, and it could be argued that how can your business be making any profit if there is no turnover for the 7 months?


If in doubt, get the recomendation from your accountant in wrinting and stick to it. If the account is wrong (which vary rarely happens in my opinion) then you have some fall back.

[Bear]

Agreed

Best thing is to take a divi now to give you enough in your personal account to pays the bills for the time your away.

Continue to take PAYE but no divis whilst your off.

Ensure something is arranged to take care of any company business whilsy your away - you will have VAT returns to do, PAYE returns to do etc. - Do not forget about these!!

[Duke]

ahh true, you have a point there regarding taking profit while company is not earning. Thanks.

Unless I take large chunk in dividends before I leave which I was going to do anyway and not withdraw dividends or salary again till I get find a new gig when I get back...Although that could take a while. Ummm

Interested to find out what other contractors do when they take time out.

[Duke]

Thanks Bear, yip sounds like it the right way to go.

yes, I did ask my accountant what steps I need to take so that they can take care of VAT and Tax returns.. etc whilst away.

[RightLaugh]

lucky bar steward

[rootsnall]

Interested to find out what other contractors do when they take time out.

If I was heading off for a good chunk of time I used to shut my Co down ( done it 3 times I think ) and use my personal capital gains allowance to save a bob or two in tax. Not sure how it works exactly with the current Co tax/dividend regime, I suggest a question to the usual suspects on here !? It costs say £150 to shut it down and its free to start up a new Ltd on your return. It also means you don't have to worry about various returns and forms while you are away. The one time I left a Co running I got in a bit of strife for not submitting a VAT return.

[Hex]

ahh true, you have a point there regarding taking profit while company is not earning. Thanks.

Unless I take large chunk in dividends before I leave which I was going to do anyway and not withdraw dividends or salary again till I get find a new gig when I get back...Although that could take a while. Ummm

Interested to find out what other contractors do when they take time out.

Why on earth would taking dividends depend on whether you were currently earning for the company or not?

You can declare dividends for any profit which you have within the company at any time you like, regardless of whether you are still earning money for the company. Your roles as employee of the company and shareholder are completely separate.

If your company has accrued profits then it can distribute these as dividends whenever it sees fit to do so.

If you wish to continue receiving salary as PAYE as an employee then you can do so as long as the company has funds to pay this.

Neither of these things are dependant on whether your are still earning money for the company or not. It is all to do with the existing state of your company funds.

I'd probably continue taking PAYE up to NMW and take the rest as dividends as I required.

[Alan @ BroomeAffinity]

If you are away for 7 months I'd do as someone has already advised:

Shut down the company and take what you can as your return on capital maximising your CGT threshold.

Its easy done - I've advised on this on a lot of occasions.

[Duke]

Sounds like an idea, although I’ve only got 7 weeks left before I leave. Would this be enough time to sort out all my payments for VAT & TAX before I leave.

Im sure if I spoke to my accountant about the idea, probably advise not to close and to keep me on there books for business.

If I decided close the Co, Should I keep paying an accountant in case other issues arise further down the line, TAX & VAT….or is that all sorted out when closing down the Co ?