Close down company for two month break?

[dude69]

I am going to take two months off and get a new contract. There is not a huge amount of money in the company, perhaps £30k.

Is this a good idea?

It's somewhat possible that I might become a permy or it might take longer after my break to find a new gig.

There is a CT payment to HMRC due in September for last year, and I guess another one would be payable for the final accounts.

The only reason I am thinking of it is basically as some kind of IR35 escape route, i.e. once the company is gone its IR35-proof. And of course it's nice to get closure.

I guess in an ideal world, I'd wait a month or so to tie up the loose ends, then start closing it down, but I could well be starting a new contract then.

Obviously the 'phoenix company' issue is there - it's not ideal to be creating a new company that's the same as the old is it.

[expat]

I am going to take two months off and get a new contract. There is not a huge amount of money in the company, perhaps £30k.

Is this a good idea?

It's somewhat possible that I might become a permy or it might take longer after my break to find a new gig.

There is a CT payment to HMRC due in September for last year, and I guess another one would be payable for the final accounts.

The only reason I am thinking of it is basically as some kind of IR35 escape route, i.e. once the company is gone its IR35-proof. And of course it's nice to get closure.

I guess in an ideal world, I'd wait a month or so to tie up the loose ends, then start closing it down, but I could well be starting a new contract then.

Obviously the 'phoenix company' issue is there - it's not ideal to be creating a new company that's the same as the old is it.

Why so hasty? If you might ever need it, keep it for the moment. Don't forget to keep making returns (PAYE & VAT) even if zero. The company happens to have no contracts currently and may or may not be paying salary and/or dividends, but it is not defunct or even dormant: it is an active company. And its employee(s) still get to use the business phone.

[chris79]

No I think you are missing his point, he has stated for IR35 reasons. This is something I didn't actually know myself, can you clarify for me dude69, is it the case that once the company is closed, IR35 cannot be investigated? This is very interesting to know! Thanks.

[expat]

No I think you are missing his point, he has stated for IR35 reasons. This is something I didn't actually know myself, can you clarify for me dude69, is it the case that once the company is closed, IR35 cannot be investigated? This is very interesting to know! Thanks.

Sorry, and it is indeed an interesting question.

Remember that you need HMRC's permission to close the company. Maybe if you are claiming to be outside IR35, applying to close the company could trigger an investigation.....

[chris79]

If it's true it kind of points to the sensible argument that it would be worth creating a new company for EVERY major contract, then closing the company once the contract ends, thus keeping all the investigations separate, and also closing the door on the risk once the contract ends too?

[expat]

If it's true it kind of points to the sensible argument that it would be worth creating a new company for EVERY major contract, then closing the company once the contract ends, thus keeping all the investigations separate, and also closing the door on the risk once the contract ends too?

BTW sorry to just stick in a rumour, but ISTR that HMRC can "see through" this and assess several companies as one, at least if they are close companies.

[Fred Bloggs]

Every contract with a different client and/or agency would be investigated for IR35 compliance anyway, would it not?

[Platypus]

Maybe if you are claiming to be outside IR35, applying to close the company could trigger an investigation.....

I frankly doubt that. There must be many many more limited companies than there are IT contractors trying to avoid IR35. But I have no evidence to back that up.

[hgllgh]

i'm sure i read a post from an accountant on one of these threads that closing the company down is not an excuse for hmrc to investigate IR35 and that in general that won't happen although logically you would think it would be a good excuse for just that?

i've had friends close down their companies and in general they have had no problems or come backs from hmrc.

[Gonzo]

i'm sure i read a post from an accountant on one of these threads that closing the company down is not an excuse for hmrc to investigate IR35 and that in general that won't happen although logically you would think it would be a good excuse for just that?

i've had friends close down their companies and in general they have had no problems or come backs from hmrc.

I think that the point the accountant made was that the two parts of HMRC that deal with these two different topics are not very joined up and there is no procedure in place for the company closure event to trigger any collaboration.