Closing Contractor Limited Company

[Danielsjdaccountancy]

My thoughts were that closing a company and re-opening a new one just to clear it up and be nice and tidy is not business justification. You should know enough about your finances to clean it up and continue to run it cleanly. Closing it down just because you don't like the look of the spreadsheet for a period is silly. It is a company not a scrapbook that you can swap if one gets a bit tatty.

If your accounts are a mess closing one company and starting another doesn't make the problem go away. if anything it points a big bad finger at you trying to hide something and sweep it under the carpet.

As has been mentioned changing company during contract is very messy as the contract is with your old company so have to re-do contracts, banking etc etc.

All this because it was a bit of a mess seems a bit over the top so I think myself and the other OP's still think this smells fishy even though you have stated not.

Agreed, your self-assessment will also show you as a director of two companies in one tax year. This could flag you to HMRC's attention, not something you want to experience should they investigate.

[FiveTimes]

I wouldn't close the company but get a better accountant

[tyut4669]

Agreed, your self-assessment will also show you as a director of two companies in one tax year. This could flag you to HMRC's attention, not something you want to experience should they investigate.

Thanks for letting me know. Is n't this a common scenario for whoever closes a company to open another. And, are not lot of people doing this?

[Platypus]

Agreed, your self-assessment will also show you as a director of two companies in one tax year. This could flag you to HMRC's attention, not something you want to experience should they investigate.

Really? There must be many people who do this, outside the world of IT contracting if not with it.

I'd be very surprised if this caused a flag.

[Clare@InTouch]

Really? There must be many people who do this, outside the world of IT contracting if not with it.

I'd be very surprised if this caused a flag.

I tend to agree. Lots of contractors have a Plan B company and I've never seen them get any more attention from HMRC than those who don't.

[Danielsjdaccountancy]

It’s the length of time between companies being closed and opened that you need to be careful of. For instance, it’s not advisable to close a company on a Friday and open a new one on the Monday even if it’s for a new contract - the revenue would just ask why not carry on trading through the same entity?

If your name appeared twice on a self-assessment as a director for two different companies then I would ensure there is at least a 6 months gap between resignation and appointment, that way it being difficult to predict 6 months in advance (this is for single director company's).

[tyut4669]

It’s the length of time between companies being closed and opened that you need to be careful of. For instance, it’s not advisable to close a company on a Friday and open a new one on the Monday even if it’s for a new contract - the revenue would just ask why not carry on trading through the same entity?

If your name appeared twice on a self-assessment as a director for two different companies then I would ensure there is at least a 6 months gap between resignation and appointment, that way it being difficult to predict 6 months in advance (this is for single director company's).

That's taken Daniel. If you say, for x, y, z reasons which are probably not the perfect reasons to re-start a company, from legal perspective, what can HMRC do?

I would take it HMRC goes by what is stated in law.

[Danielsjdaccountancy]

That's taken Daniel. If you say, for x, y, z reasons which are probably not the perfect reasons to re-start a company, from legal perspective, what can HMRC do?

I would take it HMRC goes by what is stated in law.

Its HMRC, if they investigate then it’s on a case basis. The laws are there for guidance, the probability of you being investigated is slim but by doing this it could bring you closer to the revenues eye line, raising the question, why?

[Alan @ BroomeAffinity]

@Daniel: I can't understand the logic behind doing it but equally I don't see the reasoning behind the thinking that its going to raise HMRC's attention. There's no tax benefit in doing it so I don't see why it would be on their radar. I have had many clients who have concurrent companies and never have they been. Is this just a gut-feeling thing?

[tyut4669]

The reason i like to close the company to open another:

Some of the accounting errors that happened:

1. More expenses drawn in the first year - which I am paying back to the business with interest now
2. Heavily used director loan for the past couple of years and kept filling it back with dividands. And, I have back the interest charged now. Made sure that end of the accounting year, it came down to 0 though.
3. Did not take the salary in the form of salary. Just used a mix of withdrawals, random amounts of salary withdrawn. End of the year it all matched up fine though.
4. Did not submit P11D all these years though some of the expenses should have been
5. In the second year, P35 NI figure is 900, where as i have paid 2000 to HMRC and the actual figure is 1300. How funny?

No bashing for all these. Obviously none was intentionally. All i can say is, I had a very helpful accountant.

Well.. things like these. Yes, it sounds fishy but i am trying to balance the probabbilities on carrying the uncertainity with me or close it and reduce the period of uncertainity to probably an year?