10% CGT qualification

[hgllgh]

hi all

i am considering a career break and traveling the globe after 3 1/2 years on the contracting gravy train! ... if i close down my company (one man band ltd co), go traveling for 3 months, then come back and start up another company to contract through, would HMRC come after me for more tax than the 10% CGT ?

would i qualify for 10% CGT in the first place? It is feasible I could spend longer that 3 months traveling!

The new CGT rules still haven't been effective that long but is there anyone here that has closed their company and qualified for the 10% tax? how long does it take and what questions are you asked by HMRC?

[Moscow Mule]

http://www.hmrc.gov.uk/cgt/entre-faqs.htm

http://www.hmrc.gov.uk/cgt/disposal.htm

Looks like you'll have to email them to get a definitive answer

[Dow Jones]

Not so fast!

If it were that easy! There was previously a qualifying period of 2 years to be able to do this, not sure what the recent changes have done to it.

[Ruprect]

I *think* that the new rules mean that you can only claim the Entrepreneurs relief once a lifetime...

[hgllgh]

Cheers MM.

It looks like I would qualify in terms of closing down the whole of by business and there are no assets to deal with, just revenue generated from clients.

The FAQ is a bit odd, it gives a load of obscure examples and at the end of each says "to qualify for relief all the qualifying conditions have to be met" but doesn't say what the qualifying conditions are?

All I really want to know is that will HMRC accept going traveling for an indefinite period as a vaild reason for closing down my company and paying just 10% tax on the proceeds in my business account? And then if so, will they come after me if I come back and start contracting through another ltd co?

[hgllgh]

If it were that easy! There was previously a qualifying period of 2 years to be able to do this, not sure what the recent changes have done to it.

from the FAQ link above it looks like the qualifying period is one year ...

"There are no rules about the working hours of officers and employees. The condition is only that the individual is an officer or employee of the company throughout the one year qualifying period. However in order to qualify for relief all the qualifying conditions have to be met"

why can't HMRC just provide a simplified list of the main conditions

[Moscow Mule]

I *think* that the new rules mean that you can only claim the Entrepreneurs relief once a lifetime...

not according to the second link;

5. An individual will be able to make claims for relief on more than one occasion, up to a lifetime total of £1 million of gains qualifying for relief.

But I also think that to qualify you must be closing your business without the intention to open another one.

In which case, hgllgh should not tell them he plans on coming back...

[Dow Jones]

So obvious

Whatever the waiting time is, they won't take kindly to anyone closing a company for no apparent reason, then to open another one more or less straight away. I know of contractors that got permie jobs, waited for a couple of years then got the 10% taper relief that was then available. Alternatively, go with a brolly for some time, then start again. Just don't make it so glaringly obvious, as you suggest, if you don't want to draw attention.

[hgllgh]

not according to the second link;



But I also think that to qualify you must be closing your business without the intention to open another one.

In which case, hgllgh should not tell them he plans on coming back...

well, i believe that rule is in place to prevent someone closing down their company, paying 10% tax, then starting up again straight away thus avoiding higher rate income/dividend tax. but if you are travelling for an indefinite period of time then i think that would be ok?

has anyone actually got recent experience with this issue?

[Crossroads]

Within the past few weeks, HMRC have confirmed that my impending company closure can make use of ESC C16, therefore I can distribute the funds in the company as capital.

It took them 3 - 4 months to respond to me.

This means it will be subject to CGT, not income tax. Sadly I haven't made more than £1m, so it will be at 10%.

I have no intention of opening another company in the short term, and if I do it will have a materially different share structure as well.

If I were to close one company and immediately open another, I would expect HMRC to hand me a large bill should I be investigated.