Closing Contractor Limited Company

[Danielsjdaccountancy]

I understand your reasons for doing it, however as mentioned before its a lot of work closing and opening a company. Yes there have been problems but these will need to be ironed out when you close the company anyway?

[Wanderer]

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?

I would answer "That's none of your business".

Not being funny, but if you aren't applying for ESC-C16 or avoiding tax or anything like that then it really isn't any of their business, is it? Do you legally need a reason to close a company? No. if the company has paid it's taxes and filed the accounts then there is no reason for them to object to it being struck off.

[Danielsjdaccountancy]

Agreed. I'm just giving advice so it doesn't get to that stage; the last thing you want is HMRC looking at your company, especially with the power to go back retrospectively.

[Alan @ BroomeAffinity]

@Daniel: If you apply that logic, then you'd be best not paying any expenses and extracting all income salary. That seems to me to be a tiny bit overcautious.

[tyut4669]

Guys. Thanks for participating in the thread.

My original question in simple terms:

I understand there is bit more probability of HMRC making an audit by closing the company. I have no problems with that. What I am really keen to know is, If I can not justify the closure of my business to start up another, what are the implications? Does that add any extra risk?

yes, this leads to a doubt in the tax officer mind that there may be something fishy. so what? Is he in any right to ask me to provide a justification?

Can some expert point to a legal document around this? I have spoken to one of the accoutex tax advisors, she says, there is no extra risk. But sjd accountant daniel seem to imply that 'something' can go wrong, whats it? can you refer me to something.

He mentioned, it is caselaw end of the day. Does that mean, there is something that i got to be careful of?

[northernladuk]

I would answer "That's none of your business".

Not being funny, but if you aren't applying for ESC-C16 or avoiding tax or anything like that then it really isn't any of their business, is it? Do you legally need a reason to close a company? No. if the company has paid it's taxes and filed the accounts then there is no reason for them to object to it being struck off.

I kinda agree it isn't as Wanderer says any of our business but I would say that no you don't legally need a reason but it appears to me that the OP is planning on closing his company to avoid naughty things and get away with it and is desperately looking for an answer as to how safe he is going to be once he does it. I read between the lines that 'I am in the crap, I want to push the naughties under the carpet, is there anyway I could get caught doing this'.

To ask why doesn't he trade in current entity is a perfectly reasonable question to soemone that is asking a question about a totally above board and reasonable situation. I don't believe the OP is.

His comment

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?

reads carrying on with the chance of getting caught or close it and get away with it.

I for one don't feel I can give resonable advice until the truth is known as it might affect the advice given so I think any question is reasonable. If he wants our advice we need to know the situation.

[tyut4669]

I for one don't feel I can give resonable advice until the truth is known as it might affect the advice given so I think any question is reasonable. If he wants our advice we need to know the situation.

Alright. We can leave it there. There is nothing more that it is there to disclose.

Probably, here is what I gather:

1. The kind of issues I ran into with my accountant, it looks like they are all perfectly legitimate and arguable. Most importably, the feel that I have is, many other companies get into as many problems in as few years. It might just be my curiosity to get into accounts, I seem to gather, there are most innocents that do not even realize that.

2. For the specific question on, closing the company and opening the company and the risk on not being to able to justify why, Majority seem to say it is perfectly legal. For some who kind of seem to know more details, but can not believe my position. So, appears not to comment any further.

I would probably keep a closure here with this summary. But I still think, from legal point of view there must be an answer for Q2. It is just that there does not seem be as qualified one in this forum, who has the bottom line answer. It might just be that noone has U never know.

[Clare@InTouch]

Alright. We can leave it there. There is nothing more that it is there to disclose.

Probably, here is what I gather:

1. The kind of issues I ran into with my accountant, it looks like they are all perfectly legitimate and arguable. Most importably, the feel that I have is, many other companies get into as many problems in as few years. It might just be my curiosity to get into accounts, I seem to gather, there are most innocents that do not even realize that.

2. For the specific question on, closing the company and opening the company and the risk on not being to able to justify why, Majority seem to say it is perfectly legal. For some who kind of seem to know more details, but can not believe my position. So, appears not to comment any further.

I would probably keep a closure here with this summary. But I still think, from legal point of view there must be an answer for Q2. It is just that there does not seem be as qualified one in this forum, who has the bottom line answer. It might just be that noone has U never know.

It's not that no one is qualified enough to answer your question, it's a pretty simple question. Can someone legally close one company and open another? Yes. No one is disputing that. The part people do not agree on is whether this would raise eyebrows at HMRC, and there is no definite black and white to that one - it's opinion. There is no way you'll get a yes or no answer unless you ask HMRC themselves, and the question itself would raise eyebrows and lead to them likely looking into your accounts!

Your part 1 regarding the issues you had with your accountant being legitimate and arguable, if you mean adding in expenses that you didn't incur then that's not legitimate or arguable I'm afraid. Thankfully I've only ever come across a tiny proportion of accountants who would be daft enough to suggest their clients do it.

The general advice on this thread has been that you need to talk to an accountant. Not only for the current company but also to properly advise you on how to proceed. I'm not saying this from a biased point of view as I suggest you call many different firms and compare the advice you're given. If what they say is consistent across the board, and with your own research, then you'll be happier that you're on the right track.

[Danielsjdaccountancy]

Link from Companies House

Closing / Dissolving a company (Striking-off or winding-up)

And HMRC

HM Revenue & Customs: Selling or closing your company and Corporation Tax

Companies House back up that closing a company midway through a contract is not advisable, as is closing it on a Friday and opening it on a Monday - you need to have ceased trading 3 months.

HMRC doesn't mention the scenario you have but does recommend seeking legal advice, which you have done through speaking to Accountax.

[tyut4669]

Thanks Danial and Claire. Appreciate your comments.

Out of multiple accounting mess ups, the main one that bug me are these two.

1. I have withdrawn money in huge sums during the first 6 months and kept filling that up (dividend loan) with monthly dividends and made sure it fell back to 0 by year end. Something that I heard is, they might treat the money taken out as PAYE and I would be liable to NI if it comes that far.

2. There is an interim dividend in my first year for 18500 during the middle of the year, which I have realized a month down the line that it has not totally come out of profits. and I have kind of prepared a letter (as I am the only one in the company, and I do not want to fake the dividends around). I am afraid this money would be treated as PAYE amount as well.

I take all your view that there is a higher chance of audit which I am happy with. But I do not want to carry uncertainity that one day I may have to pay such a lumpsum tax with interested etc. I would take it there won't be penalties because it was not intentional. Another assumption that I have is, If i close using a liquidator, then there is no more risk potentially I have to carry even for the one year that people seem to say.

Can you comment specifically on the two problems?