I've been contracting for a few years, but now found myself with no current work. There is still cash in the company, so I am continuing to pay myself a monthly salary. I'm just wondering if this is my best option, or whether I can 'park' the company and at least get my NI stamp paid each month.
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Been working through own company, but no current work
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Happy to help but I don't quite understand this. So what gross monthly salary are you paying yourself at the moment?2012 CUK Reader Awards - '...Capital City Accountancy, all of whom were outside the top three yet still won compliments from CUK readers for their services' - well, its not an award, but we'll take it! - Best Accountant (for IT contractors) category
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Originally posted by ajury View PostI've been contracting for a few years, but now found myself with no current work. There is still cash in the company, so I am continuing to pay myself a monthly salary. I'm just wondering if this is my best option, or whether I can 'park' the company and at least get my NI stamp paid each month.Comment
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Originally posted by ajury View PostI've been contracting for a few years, but now found myself with no current work. There is still cash in the company, so I am continuing to pay myself a monthly salary. I'm just wondering if this is my best option, or whether I can 'park' the company and at least get my NI stamp paid each month.
You've got a couple of options available to you:
1. "Park" the company so that it's effectively "non-trading". Doing this, you can either continue to pay a salary to yourself or not. Understandably, if you wish to keep up your NI stamps, there is no issue with paying yourself a wage whilst the company doesn't have a contract in place. Consider maximising your basic rate allowance too with dividends. If you think you're going to be on the bench for longer than 12 months, think about your VAT status in the company. If you're on flat rate VAT then you may want to come off it in order to claim back any ongoing VAT non expenses. The reason I mention whether you're planning to be out of contract for 12 months is because you can't re-register for the flat rate scheme for 12 months once you come off it.
2. Wind the company up releasing any remaining profit in the company.Comment
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Originally posted by Craig@InTouch View PostHi Ajury,
2. Wind the company up releasing any remaining profit in the company.Comment
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Originally posted by Jeystone View Postand how much would the remaining capital be taxed? what prevents you from starting and closing limited companies this way?
If they were simply closing one down and opening another up, there is unlikely to be an concession granted by HMRC to allow the contract to distribute the remaining profit as capital. Instead, they would have to treat the distribution as dividends.Comment
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Originally posted by Craig@InTouch View PostAll depends on the contractors circumstance. If they are closing the company down for commercial reasons i.e. no more contracts and therefore, no requirement for the company any more, then they could be eligible for entrepreneurs relief which would mean they can distribute the profit in the company as capital and pay capital gains tax on the remaining profit at effectively 10% personally.
If they were simply closing one down and opening another up, there is unlikely to be an concession granted by HMRC to allow the contract to distribute the remaining profit as capital. Instead, they would have to treat the distribution as dividends.Comment
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Originally posted by Jeystone View Postwouldn't this be a great way to "avoid" tax? open and close a limited company a year?Comment
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