9 month break - To retain accountant & keep company open?

[Greg@CapitalCity]

Depends

The decision depends on numerous factors, but generally I would say it is better to close down your company if you won't be using it for 9 nine months, and if you are not 100% sure you will use it when you return to the UK. I am just looking at this from a tax angle - you might just want to keep the company because you like its name....

Pro's for closing the company now;
(1) You get to extract 60k tax efficiently. To use entrepreneurs relief you need to apply for ESC C16 treatment. There are whispers this is going to be pulled, though there is nothing concrete on this. So at the moment the tax rules work in your favour;
(2) You get to close the business and draw a line under it. So if the HMRC were to review your records and decide the whole lot was caught by IR35 you could face a big tax bill. If they did that next year with a newly started company, the amount of revenue at risk would be substantially lower;
(3) If you pull £30k this year out, and 30k next year, then for next year, you will already be close to the higher rate earnings threshold before you even start back contracting again. And if you decided to go perm and earn £50k a year, well most of those dividends you paid yourself in 2012/13 would be subject to higher rate tax;
(4) You may also save in accounting fees depending on how your accountant charges for your services;
(5) Its also really easy these days to get a new company set-up these days. The bank account is also usually very quick, its just the VAT registration that can take 2-3 weeks (which isn't a major drama either really);

Good luck.

[Fred Bloggs]

Let's say you were leaving next week:

Speak to your accountant and tell them that you won't be trading for a while so you will not be needing their services for the time being. However, there is some work for them to do and you would like them to quote you a fixed price for it. What you want to do is:

1. Take a salary of £7,000 (or whatever the amount is) for the PAYE year so you don't have to pay any PAYE or NI. Once you have the monthly amounts, set up the bill payments to automatically pay you for this tax year and the next one too.
2. Immediately declare and draw as much dividend as you can up to your higher rate tax for the income tax year to April.
3. Calculate the max dividend you can draw for the next tax year. (Don't tell your accountant, but just quietly do the meeting minutes and dividend voucher for this in advance then set up a payment to go out on the 6th April for the full dividend for the next income tax year)
4. Arrange for your accountant to do the quarterly nil returns for PAYE and VAT over the next 12 months (a few minutes work per quarter)
5. Get the accountant to figure out how much money is left in the company at the end of all this (eg make sure it's not insolvent)

Really, there isn't much work involved here. They should be happy to quote a fixed fee for this and advise you if there is any other paperwork you need to file during that time. As for year end accounts, changing your year end is simple and would be a good way to move the deadline for filing your accounts to a more convenient time.

Just don't blow all your money on holiday......

And if there's anything left over, consider making a contribution to a pension.

[Joxer]

Let's say you were leaving next week:

Speak to your accountant and tell them that you won't be trading for a while so you will not be needing their services for the time being. However, there is some work for them to do and you would like them to quote you a fixed price for it. What you want to do is:

1. Take a salary of £7,000 (or whatever the amount is) for the PAYE year so you don't have to pay any PAYE or NI. Once you have the monthly amounts, set up the bill payments to automatically pay you for this tax year and the next one too.
2. Immediately declare and draw as much dividend as you can up to your higher rate tax for the income tax year to April.
3. Calculate the max dividend you can draw for the next tax year. (Don't tell your accountant, but just quietly do the meeting minutes and dividend voucher for this in advance then set up a payment to go out on the 6th April for the full dividend for the next income tax year)
4. Arrange for your accountant to do the quarterly nil returns for PAYE and VAT over the next 12 months (a few minutes work per quarter)
5. Get the accountant to figure out how much money is left in the company at the end of all this (eg make sure it's not insolvent)

Really, there isn't much work involved here. They should be happy to quote a fixed fee for this and advise you if there is any other paperwork you need to file during that time. As for year end accounts, changing your year end is simple and would be a good way to move the deadline for filing your accounts to a more convenient time.

Just don't blow all your money on holiday......

Some great tips there Wanderer, many thanks.

It feels like I could quite comfortably do steps 1-4 myself and as long as I keep good track of outgoings vs. the balance in my company account step 5 seems reasonable to do myself also.

On that basis I'm struggling to see any compelling reason to retain the accountant for this 9 month period - especially seeing as I return prior to 2011/2012 year end and can presumably find another accountant to produce my year end accounts (which will be quite simple given minimal trading activity).

Am I missing anything folks?

I've a meeting scheduled this week with my accountant to discuss this. Unless they come back with a relatively low fee for the above I'm leaning towards no longer retaining them.

[lje]

Of the top of my head things which may need to be done in your 9 months:

• VAT return and payment
• Paying PAYE
• Accounts to be sent to companies house (9 months after year end)
• Corporation tax payment (9 months after year end)
• PAYE/NI annual return

[yasockie]

One more thing to consider is company reputation.
Normally when you're contracting, you're marketing your own CV but in the long run, if you want to try and grow the business a bit, you might consider marketing your Ltd Co as a services/expertise provider - then it will matter whether your co has been in the market for 3 or 10 years and is easy enough to check - even when I google my own ltd co I get all the companies house details on the 2nd spot....