Reply to: LTD lost the biggest client. Thinking of staff cuts.

[JoJoGabor]

I know I will get a slating for churning out the same old comment but you really should speak to your accountant first before starting with a load of ideas that just won't work. He will give you all your options and work out the best route for you. No problems, no stress and best solution. Don't think of the first fudge you can come up with then ask a bunch of strangers if it's the best thing to do for your company.

If everyone just asked their accountant, ideas and knowledge would not be spread on this forum. I personally found this trail very interesting. Let's not stifle discussion otherwise we may as well freeze the forum completely

[Jack Kada]

Before you poke too many sticks at the Accountancy profession, perhaps do some research on the Ramsay principle...

Thanks - Very interesting and informative ...

Learnt something new today

[Maslins]

The role of an accountant (in addition to balance sheets etc.) is to give advice on how to comply with the law and minimise taxes legitimately – if you want one that can create schemes to make income appear as something else that is not taxable, see the EBT threads on these boards.

Spot on.

[malvolio]

So if the wife was the director and you a shareholder then would this proposition have legs?

The concensus here seems to be that because you are a director of a company any redunancy is not involuntary. If your wife was the director and she made you redundnat then could that be a way to achieve the outcome that the OP was interested in?>

You can see the difference of opinion and the court of appeals ruling shows that no accountant could give a definitive answer to this and when faced with a contentious issue will normally say no to avoid any possible claim on their indemnity insurance

Before you poke too many sticks at the Accountancy profession, perhaps do some research on the Ramsay principle...

[Jack Kada]

Agree with what others have already been saying. Since you have a controlling share in the company, making yourself redundant is essentially the same as choosing to leave the employment – any payment made would therefore not qualify as being tax-free.



The role of an accountant (in addition to balance sheets etc.) is to give advice on how to comply with the law and minimise taxes legitimately – if you want one that can create schemes to make income appear as something else that is not taxable, see the EBT threads on these boards.

So if the wife was the director and you a shareholder then would this proposition have legs?

The concensus here seems to be that because you are a director of a company any redunancy is not involuntary. If your wife was the director and she made you redundnat then could that be a way to achieve the outcome that the OP was interested in?>

You can see the difference of opinion and the court of appeals ruling shows that no accountant could give a definitive answer to this and when faced with a contentious issue will normally say no to avoid any possible claim on their indemnity insurance

[blacjac]

Hi all,

employee of the above LTD earning £10 000 per year.

Yes, I have contract of employment

Aren't you breaking minimum wage laws there (assuming you work more than 29.5 hours a week...)??

[Craig at Nixon Williams]

Agree with what others have already been saying. Since you have a controlling share in the company, making yourself redundant is essentially the same as choosing to leave the employment – any payment made would therefore not qualify as being tax-free.

Instead accountants focus on number and balance sheets rather then focusing on devising schemes to make people redundant.

The role of an accountant (in addition to balance sheets etc.) is to give advice on how to comply with the law and minimise taxes legitimately – if you want one that can create schemes to make income appear as something else that is not taxable, see the EBT threads on these boards.

[TykeMerc]

Yes it is. The challenge is not because you are a director, but because your role is not actually redundant since the company continues to trade in the same line of work. Secondly, redundancy has to be involuntary which is tricky if you are the one making the decision to make yourself redundant. Plus of course you remain a shareholder in the company and so fall outside the statutory redundancy provisions anyway.

Still it's your call. Get it wrong and you get done for tax evasion...

Exactly.

If garnet's wizard wheeze was a sensible (or even remotely viable) approach to being on the bench then it would be in common use, it would be an obvious tax avoidance strategy for someone planning to close TheirCo Ltd too.

[malvolio]

It seems it is not 100% known which way would this go.

Yes it is. The challenge is not because you are a director, but because your role is not actually redundant since the company continues to trade in the same line of work. Secondly, redundancy has to be involuntary which is tricky if you are the one making the decision to make yourself redundant. Plus of course you remain a shareholder in the company and so fall outside the statutory redundancy provisions anyway.

Still it's your call. Get it wrong and you get done for tax evasion...

[garnet]

Confused - if you have an employment contract, don't you need to pay yourself NMW? That's a fair bit more than 10K a year...

I was going to say that even if redundancy is allowable, I doubt that, on NMW, you could justify a £30K redundancy payment to the tax man - the most generous package I've seen IRL is a month's salary for every year worked, but a week's is more typical.

Yes, I do pay myself NMW as expected.
The redundancy payment will be less than £30 000, just put this figure because this is what is tax free maximum for RP.
The figures for the RP you cited are just the statutory RP rates (from gov.uk)

Length of service is capped at 20 years and weekly pay is capped at £464. The maximum amount of statutory redundancy pay is £13,920.

You can give your staff extra redundancy pay if you want to, or have a qualifying period of less than 2 years.

so more is not a problem. The problem is if this whole scheme will attract attention from the HMRC.
It seems it is not 100% known which way would this go.

[mudskipper]

Confused - if you have an employment contract, don't you need to pay yourself NMW? That's a fair bit more than 10K a year...

I was going to say that even if redundancy is allowable, I doubt that, on NMW, you could justify a £30K redundancy payment to the tax man - the most generous package I've seen IRL is a month's salary for every year worked, but a week's is more typical.

[mudskipper]

If you google "sole director redundancy" there's a lot of threads with differing opinions, the consensus seems to be "no, for reasons explained here, but there are a number of opinions suggesting it is possible.

Contractor Doctor: Can I receive a tax-free redundancy payment from my ltd company?

This one's interesting - it looks like someone has successfully claimed redundancy, even when insolvent.

http://www.contractoruk.com/limited_...d_company.html

There are certain benefits for a sole director to be an employee of the company. In the case of Secretary of State for DBERR v Neufeld [2009], the Court of Appeal decided that, on the facts, a director was also an employee and could claim redundancy payment from the Secretary of State under the Employment Rights Act 1996 (s188) when the director's company became insolvent in the same manner as former Woolworths employees.

I think it's more a question for an employment law specialist than for an accountant.

[tractor]

...

The problem with this sort of advice is that accountants are by and large not really clued up to answer this and push the boundaries on what can and cannot be done

Instead accountants focus on number and balance sheets rather then focusing on devising schemes to make people redundant.

I personally think there are some legs in this proposition

If you read the taxation manuals on the HMRC web site yourself (you and the OP) you will find that this ruse is about as legless as NorthernLadyUK at the office xmas party.

Yes, this idea will gain lots of interest (sic) from the tax man. Probably lots of fines and penalties too upon which you would have to pay more ummmm interest.

[psychocandy]

Plan D - Keep the company running, just issue yourself a P45 and then claim JSA. When you get a new contract just employ yourself again.

[northernladuk]

The problem with this sort of advice is that accountants are by and large not really clued up to answer this and push the boundaries on what can and cannot be done

Instead accountants focus on number and balance sheets rather then focusing on devising schemes to make people redundant.

I personally think there are some legs in this proposition[/QUOTE]

I could maybe kinda see your argument if you are picking any old accountant but if you have done your homework and have picked a contractor specialist he will have been asked this many times over and will be well aware of the right path to take. If you don't think he is then you need to change your accountant.

The other option is some random on a free BB board. I know which way I would be going.....