LTD ceasing to trade & entrepreneurs relief

**northernladuk** · 28 July 2011, 18:45

Question is why are you closing the LTD?

The answer to this will help you choose your options better.

**Fishface** · 28 July 2011, 21:06

Been advised that it will look like an investment company if something is not done with company cash... Havent touched it for years

**Greg@CapitalCity** · 28 July 2011, 21:56

Ceasing to trade

I am guessing the reference to 40% tax is the cumulative effect of paying Corp Tax, and then declaring a final dividend when closing down your business and paying higher rate personal tax on the lot of it.

Entrepreneurs relief will in all likelihood stay, its just the closing of the company using ESC C16 that might limit your ability to access it. There is no guidance as to what will happen yet with this. The governments consultation document talked about a £4,000 limit, and that any final distribution made in excess of this would be liable to income tax. Or you could formally liquidate your company and access they full Entrepreneurs Relief - however the cost of the liquidation process would need to be factored in to help you decide whether this would be tax efficient or not, overall. Who knows how it will turn out - the current proposal though will, I am sure, have the insolvency profession rubbing their hands together.

There is still uncertainty about what will happen, but if your company has ceased trading and you have a significant sum of money tied up in it, using ESC C16 while you still can is probably a very good option.

**Fishface** · 29 July 2011, 06:58

Thanks, yes esc c16 does seem the way to go but this then disallows opening a new ltd to continue invoicing - as i understand.

So how does one continue to invoice after using esc c16?

**sbakoola** · 29 July 2011, 07:46

One question though, if you opt for the insolvency route and liquidate your company will this have any future negative impact on either your (the director's) personal credit rating or the rating of the company itself ? this is significant as I work in investment banking and this sort of thing may get looked up when it comes to the credit check.

I've been looking into Entrepreneurs Relief and it seems like a really GREY area, very subjective when it comes to HMRC actually granting you ER (which would be 10% tax for ER after all PAYE and dividend and Corporation Tax and VAT have been paid out of your Limited).

Also with ER there seems to be some rule where the money in your limited that has to qualify as trading profit (or was it non-trading profit I cannot remember) so even though they state its up to £5 million over a life time you can claim for ER it really is only around £100K which is a good annual salary which a contractor pays himself through income and dividends.

I'm still very weak in my understanding of all of this, I'm one of the millions of people in the UK with money sat in a limited bank account doing practically 'nothing' for the economy earning a modicum of interest being lent out to god knows who by the holding business account bank.

Also there are rules such as 'if you apply for ER you are stating that you are no longer working in that area .. so it would be frowned upon if you immediately start your next contract in I.T. with a brand new limited company starting at 0'

the whole thing is a shambles. HMRC if you are reading this please give us the ability to withdraw all our money out at a reasonable rate of tax so we can get on with spending and investing in proper business ventures and boosting this economy....

**Fishface** · 29 July 2011, 08:21

What about a ROI company with £ bank account?

Anybody doing this?

LTD ceasing to trade & entrepreneurs relief