End of ESC C16 1/3/12.

[ChimpMaster]

From the sound of the proposed legislation, you can appoint a liquidator to still gain a favourable tax outcome. Of course, this is at a cost of £5,000 or thereabouts, but if you have a sizeable sum then it's worthwhile.

The question is, does appointing a liquidator guarantee closure of the company with proceeds paid out as capital gains? Or can HRMC still refuse? The worst case scenario would be paying the liquidator, who then fails and so HMRC force you to take proceeds as dividends.

[centurian]

And worse - if you are forced to take a dividend on a big chunk all at once, it can easily push you into the (effective) 50% band - meaning you are taxed higher than if you had taken it out in the year the profits were earned.

[sbakoola]

and no ESC16 means NO 'Entrepreneurs Relief' ????????

how can this be ?

[Waldorf]

Unfortunately, I never kept a copy of the SJD literature, but I remember quite clearly that SJD used to recommend that you paid yourself up to the 40% tax threshold then closed your Ltd Co down after 3 years, rinse and repeat. I never did this. I asked SJD about this approach at the time, of course SJD claimed there was never a problem with it. But my take was that it was taking the pi55 somewhat. From memory, they were definitely recommending contractors took that approach about 8 or so years ago, that would be about when I was looking into it.

Yes, I remember that, during my first stint working through my own limited company, I was told that you were not supposed to simply set up a new company, it did seems a bit sailing close to the wind, and did not fit in with my risk taking profile.

[ChimpMaster]

Yes, I remember that, during my first stint working through my own limited company, I was told that you were not supposed to simply set up a new company, it did seems a bit sailing close to the wind, and did not fit in with my risk taking profile.

Could you set up a company in your wife's name, for example? Putting aside the trust factor, what's to stop you closing your Ltd, using ESC16, and then your wife starting a new Ltd with her as director and you as employee?

[malvolio]

Could you set up a company in your wife's name, for example? Putting aside the trust factor, what's to stop you closing your Ltd, using ESC16, and then your wife starting a new Ltd with her as director and you as employee?

The Ramsay principle for one, and the existing rules about connected persons.

[northernladuk]

and no ESC16 means NO 'Entrepreneurs Relief' ????????

how can this be ?

WTF is that supposed to mean?

[ruth11]

Just found out about this today.

So much for encouraging entrepreneurs

[Nixon Williams]

Just found out about this today.

So much for encouraging entrepreneurs

You can still qualify for Entrepreneur's Relief but this in reality will be limited to companies with larger cash piles.

If the cash is below £25K then you will be able to extract the cash using basically the same tax rules as now.

If the cash is above that then you will need to discuss with your accountant whether a formal liquidation is worth the extra cost, against the tax savings that can be made.

My guess is that unless the cash involved is above £40-50,000 then it may be more efficient to extract dividends to get to the £25,000 sum and dissolve in accordance with the new rules.

It is certainly to be recommended that you discuss this with your accountant, as every situation will be different.

Alan

[ruth11]

You can still qualify for Entrepreneur's Relief but this in reality will be limited to companies with larger cash piles.

If the cash is below £25K then you will be able to extract the cash using basically the same tax rules as now.

If the cash is above that then you will need to discuss with your accountant whether a formal liquidation is worth the extra cost, against the tax savings that can be made.

My guess is that unless the cash involved is above £40-50,000 then it may be more efficient to extract dividends to get to the £25,000 sum and dissolve in accordance with the new rules.

It is certainly to be recommended that yopu discuss this with your accountant, as every situation will be different.

Alan

Hi Alan

Good job you're my accountant then

In my case, I was planning to see where I am at the end of my current contract (ends mid-March currently and I'm not sure if there will be an extension) and my plan was to use this legislation to close my company and take the cash out if I've reached my goal (and I think I will have).

I have deliberately not been going over the 40% tax bracket each year that I've contracted so that I can take the rest out using Entrepreneur's Relief and there will certainly be more than £50000 of money in there.

I'll get in touch with my account controller and find out what's what, because maybe I should start taking money out this tax year rather than leave it in there.