ESC16 & reopenig company

[Gonzo]

I can't find where it says it can't be done but I am sure if you are honest with the HMRC they will not grant it.

I don't think that there is anything explicit that stops you from doing exactly that, which is why the rules are changing.

[northernladuk]

I don't think that there is anything explicit that stops you from doing exactly that, which is why the rules are changing.

Indeed but that still doesn't it mean it is allowed and has no come back on the OP for doing it. Guess it is about your attitude to risk at this point.

[waccoe]

So, to sum this up. It sounds like its not legal, but I don't think anyone has actually stated the exact law that it contravenes.

I'll admit to being fairly risk adverse, but it seems others have done it without any comeback. Does anyone know of any cases where someone has been investigated and been ordered to payback the tax that they've 'illegally' taken through an ESC16? Because I haven't heard of any.

[northernladuk]

So, to sum this up. It sounds like its not legal, but I don't think anyone has actually stated the exact law that it contravenes.

I'll admit to being fairly risk adverse, but it seems others have done it without any comeback. Does anyone know of any cases where someone has been investigated and been ordered to payback the tax that they've 'illegally' taken through an ESC16? Because I haven't heard of any.

Me neither to be fair but it is not like we here much about peoples tax issues. If I did get invetigated I don't think I would be shouting all over the web tbh. I am very risk averse and this one sounds like a total no no for me personally and in my mind it's wrong. Far too much to lose if it goes wrong for not enough gain imo... but I don't know what the values you are talking are so up to you. I am not condoning it if you are after opinion.

[waccoe]

Me neither to be fair but it is not like we here much about peoples tax issues. If I did get invetigated I don't think I would be shouting all over the web tbh. I am very risk averse and this one sounds like a total no no for me personally and in my mind it's wrong. Far too much to lose if it goes wrong for not enough gain imo... but I don't know what the values you are talking are so up to you. I am not condoning it if you are after opinion.

I think you'd be surprised, the first thing people tend to do if they are being investigated for something like this is post on the net for advice, and how to get out of it. I haven't managed to find a single case on the net, which probably naively, makes me think everyone gets away with it, hence the closing of the loophole in March.

When my friend did this, he had 200k built up in his company account, for me it's nearer half of that. But I take your point that its probably not worth it for the possible gain.

[sbakoola]

If you go for the voluntary insolvency option to wind up your Limited Company that doesn't have any impact on the director's credit rating ????

Its a shame they limited ESC16 to £25k, the deadline is around March 2012 I think.

[Greg@CapitalCity]

So, to sum this up. It sounds like its not legal, but I don't think anyone has actually stated the exact law that it contravenes.

Transactions in securities is where you should be looking;
(1) Relating to income tax - Look in Income Tax Act 2007 - Part 13 Tax Avoidance, Chapter 1 Transactions in securities - http://www.legislation.gov.uk/ukpga/...t/13/chapter/1

For the rules to take effect, the main (or one of the main purposes) for the taxpayer engaging in using ESC C16 is to obtain an income tax advantage.

[waccoe]

Transactions in securities is where you should be looking;
(1) Relating to income tax - Look in Income Tax Act 2007 - Part 13 Tax Avoidance, Chapter 1 Transactions in securities - http://www.legislation.gov.uk/ukpga/...t/13/chapter/1

For the rules to take effect, the main (or one of the main purposes) for the taxpayer engaging in using ESC C16 is to obtain an income tax advantage.

Thanks for that, exactly what I was looking for. Something in black and white, which states that it is in fact tax avoidance and illegal. Will have to let my friend know, as he was adamant that this was just a well known loophole.

[philip@wellwoodhoyle]

hence the closing of the loophole in March.

But the "loophole" isn't being closed, in fact quite the reverse. At the moment, you have to apply to HMRC for "clearance" but after the March change, you won't, so in fact, there's less opportunity for HMRC to know what's going on and try to stop any alleged tax advantage.

The change is that you can't do it for over £25k unless you go down the formal liquidation route, but again this route doesn't have a "clearance" system so again HMRC won't know about it.

So, the reality is that more people are likely to be able to abuse the system because the prior "clearance" is scrapped, and so HMRC havn't the foggiest idea about what's going on and therefore have a greatly reduced chance of catching the abusers.

[sbakoola]

Which brings me onto my next question, I saw that someone mentioned that firms that allow your limited to go via voluntary insolvency cost around £3k for the entire procedure. Does the insolvency company contact your accountant or does the insolvency company effective become the accountant of your limited company ?

When my current contract is over, I'll be looking for a company which deals with limited company insolvency, anyone got any recommendations ? At the moment I am with SJD Accountancy London and when I called them up about it I got someone with an Indian accent stating that 'they have to comply with money laundering rules and regulations etc' and fobbed me off - which is fair enough if you don't know, don't know but....

Also if you partake insolvency (voluntary) how does this affect the limited company director's credit rating ? this is important as the industry I work in looks at credit scores etc. for employment.

If you could answer the above questions it would be much appreciated.

This will be my last I.T. gig ever so the company I am starting up after I close my existing one will no be used for IT contracting services.

Scott.