Changing ltd co part way through contract

[BolshieBastard]

Considering suggestion by accountant to wind up existing ltd co and form a new one. This way, I'd qualify for VAT FRS extra discount for 1 year. Also, in part to lessen IR35 impact by closing the current ltd co.

Now, I could wait until the current contract ends in June 09 but dont really want to wait that long so, has anyone closed their existing ltd co and opened a new one during a contract and billed from there on via new ltd co? Has anyone found agents difficult over this, particularly Parity who Im currently through?

[max]

Now, I could wait until the current contract ends in June 09 but dont really want to wait that long so, has anyone closed their existing ltd co and opened a new one during a contract and billed from there on via new ltd co? Has anyone found agents difficult over this, particularly Parity who Im currently through?

I did it a few years ago with one of the larger city agencies. They were fine about it, simply issuing a replacement contract.

Not sure if you were thinking of applying for BATR/ER, but recently(saw it on the PCG forums) a contractor had it rejected apparently based on the fact that they had set a new ltd at the same time they closed the first one down. The capital gain had to taxed as dividend.

[BolshieBastard]

I did it a few years ago with one of the larger city agencies. They were fine about it, simply issuing a replacement contract.

Not sure if you were thinking of applying for BATR/ER, but recently(saw it on the PCG forums) a contractor had it rejected apparently based on the fact that they had set a new ltd at the same time they closed the first one down. The capital gain had to taxed as dividend.

BATR\ER? No but what's that?

[Gonzo]

BATR\ER? No but what's that?

Business Assets Taper Relief / Entrepreneurs Relief.

If there is cash in your Limited Company it may be possible to get this treated as a capital gain when the company is closed and that cash is paid over to you. This may have tax advantages depending on your circumstances.

The example cited was one where the Inland Revenue did not accept that the business was ceasing because a new Ltd Co was formed straight away.

[TheFaQQer]

Hypothetically - could you not leave the first company dormant rather than setting up a new one?

End up with a load of dormant companies not doing anything, but that might be better than closing the company completely and possibly paying capital gains tax on it.

IANAA (and I have no idea whether this is a good / bad or indifferent idea).

[ChimpMaster]

Hypothetically - could you not leave the first company dormant rather than setting up a new one?

End up with a load of dormant companies not doing anything, but that might be better than closing the company completely and possibly paying capital gains tax on it.

IANAA (and I have no idea whether this is a good / bad or indifferent idea).

I think he wants to close it to reduce any possibility of investigations (IR35 etc). A dormant company would not provide as much comfort.

[TheFaQQer]

I think he wants to close it to reduce any possibility of investigations (IR35 etc). A dormant company would not provide as much comfort.

Ah - missed that in the original post.

IIRC, though, HMRC won't let you just close a company until they are satisfied, so is there a chance that by trying to close the company it might bring on an investigation?

[BolshieBastard]

Ah - missed that in the original post.

IIRC, though, HMRC won't let you just close a company until they are satisfied, so is there a chance that by trying to close the company it might bring on an investigation?

This is correct but the accountant says while its a risk, in practice, it is a lesser risk.