Making myself redundant?

[nomadd]

OK, I wondering if anyone here has ever made themselves redundant? A contractor friend mentioned it on the phone the other day because of the "tax free" lump sum (30k was mentioned).

Now, the above sounds a bit too easy and too good to be true, but I just wanted to gather anyone else's thoughts.

I've cash in my company account, most of which was made last company tax year (ending Dec. 1st 2008 for me), and enough made in this company tax year (2009) to pay my salary until Dec 1st. Point is, after that, I'll be dipping into "retained profit", which I've already paid corporation tax on, so in effect I'll be paying tax on it twice - i.e. PAYE and NI when I start using it to pay salary.

My concern is that I may not have a contract role for quite some time (current time on bench is 3 months), so I'm wondering if closing the company down, making myself redundant, etc., would make any sense if I'm still "on the bench" come the end of the year?

I'll speak to my accountant about all of this at a later stage, but for now I was just wondering what other fellow contractors - with retained profit in the company account - are going to do if they find themselves on the bench for a year or more? All comments welcome - even if my thinking is misguided!

Cheers,

Nomadd

[BolshieBastard]

Nope. Been discussed here many times. You cant do it.

[nomadd]

Nope. Been discussed here many times. You cant do it.

Care to elaborate on that?

I've done a search on the forum for 'redundant' and it doesn't bring anything back.

Cheers,

Nomadd

[FarmerPalmer]

I've been working with someone that does just that.

Every 2 years he closes down a limited company that he has been working through, so as to avoid being caught for lots of back tax. And every time he does it his limited company pays 30k redundancy tax free to him.

His accountant advised against it, and he said why ? where in the law does it say I can't. and it doesn't so he does it, though his accountant isn't happy about it.

Personally I wouldn't and don't - but it depends on how well you sleep at night.

[Sockpuppet]

I've been working with someone that does just that.

Every 2 years he closes down a limited company that he has been working through, so as to avoid being caught for lots of back tax. And every time he does it his limited company pays 30k redundancy tax free to him.

His accountant advised against it, and he said why ? where in the law does it say I can't. and it doesn't so he does it, though his accountant isn't happy about it.

Personally I wouldn't and don't - but it depends on how well you sleep at night.

Wait till HMRC class him as a phoenix company and whomp him with their big stick.

[Moscow Mule]

Wait till HMRC class him as a phoenix company and whomp him with their big stick.

Isn't that less likely if you pay all of your taxes and wind the company up properly (excluding the redundancy payment obviously)?

[HeadOfTesting]

The legal position may be different now but when I looked into this during the 2001/2 collapse my accountant said you can't do this because the revenue class you as an "owner managed business" to which this option is not available.

I didn't check myself (and would have done if I was totally set on the idea) but it sounded like advice that rang true at the time.

I would be amazed if such a redundancy option is a goer but I'd be delighted to be proved wrong.

I would say that entrepreneur's relief offers a much better risk/reward ratio for anyone who thinks their ltd company is surplus to requirements. It has its own restrictions though.

HeadOfTesting