Closing old company / starting a new one

[jmo21]

Until they get caught, they get away with it. Closing down your company, working for another company, going to an umbrella, going direct etc etc does NOT reset the clock.

If you get caught, you get done for tax evasion.

A contractor I know did none of this. He just moved to a new contract/company in the same location, and thinks that keeps him compliant with the 24 month rule.

I tried explaining to him that it doesn't work like that. "My accountant says it does" says he. Nothing I could do could convince him otherwise, even sending him the examples from the HMRC website.

[MojoDog]

Closing old company / starting a new one

The nature and scope of consultation / services that I will be offering is about to widen significantly beyond the scope of those offered by the original company that I set up.
Assuming that the contract gets renewed I will remain with my current client, but will also be working with clients from a completely different industry sector, with completely different consultation/service provision requirements.
All of which would be easier to deliver under the banner of a new company.

I'm not in the business of shady practices or rule-bending. Just wanted to make that clear. 🙂

[SteelyDan]

Until they get caught, they get away with it. Closing down your company, working for another company, going to an umbrella, going direct etc etc does NOT reset the clock.

If you get caught, you get done for tax evasion.

I'm with you brother on this, but am just a bit taken aback by the general foolishness of the idea in principle & bad practice by some contractors. I guess they'd need to switch accountants too, or they'd be complicit wouldn't they?

[northernladuk]

This came up on conversation a couple of weeks ago at work with a new contractor [we were discussing the 24 month rule]. As a perm he'd apparently previously hired contractors that ended up staying in excess of 3/4 years. He was basically querying the validity of the 24 month rule. When I asked him how the contractors had got around the rule, he texted one of them there and then, who [in short] came bk & advised that he just created a new ltd co. and had the new contract put in new co name, & carried on claiming mileage etc.
Sounded like BS to me but given the initial post, then maybe that's what some ppl think they can do [& get away with it]?

Sadly this is all too common. It's a very complicated rule what with all the grey areas but the basics are pretty clear. It's all about location. If there is no significant change to the journey then the clock carries on ticking. This is explicitly covered here

https://www.gov.uk/hmrc-internal-man...anual/eim32080

This rule is modified where the employee works at a succession of workplaces but the change of workplace has no substantial effect on the employee’s journey to work. All such workplaces are treated as the same workplace for the purpose of the legislation, see EIM32280and example EIM32089.

People often forget if they leave a perm role in say Leeds and take up a contract in Leeds they are already caught.... as it goes on location. So starting a new company up won't work.

[TheFaQQer]

Sounded like BS to me but given the initial post, then maybe that's what some ppl think they can do [& get away with it]?

Until they get caught, they get away with it. Closing down your company, working for another company, going to an umbrella, going direct etc etc does NOT reset the clock.

If you get caught, you get done for tax evasion.

[MojoDog]

Just for clarity: The 24 month rule is not the reason why I'm thinking of changing.

[SteelyDan]

This came up on conversation a couple of weeks ago at work with a new contractor [we were discussing the 24 month rule]. As a perm he'd apparently previously hired contractors that ended up staying in excess of 3/4 years. He was basically querying the validity of the 24 month rule. When I asked him how the contractors had got around the rule, he texted one of them there and then, who [in short] came bk & advised that he just created a new ltd co. and had the new contract put in new co name, & carried on claiming mileage etc.
Sounded like BS to me but given the initial post, then maybe that's what some ppl think they can do [& get away with it]?

[MojoDog]

Thanks for all the replies :-)

[TheFaQQer]

Would the mileage allowance be "reset" and could my previous contract history be taken into account in the event of HMRC taking an interest?

Mileage is an annual limit, reset at the start of the tax year. So it will make no difference.

You won't be able to claim ER when you close the company down because you are continuing in the same trade (and contract!) in the new company. So you can close the company and take any reserves as a dividend or salary payment and then start the new one.

If you are working with an agency, then check with them the practicalities of changing company. If you aren't, then ensure that the client is happy with the arrangement changing.

I'd think through the practicalities carefully - even down to the level of a mobile phone, because if that's through the company then you may struggle to find a provider who will give you a contract without three months of accounts to show them.

[northernladuk]

that's the simple answer.

As for the mileage. I just noticed it's (newCO) not going to start till April, when the mileage is reset anyway. Something's not right.

Not if he's caught by the 24 month rule... And changing company won't affect that status at all.