Reply to: Closing my company down - what is left with HMRC to do?

[kesm]

Thanks for this all.

So my accountant suggests that I make my company dormant. His reasons for that were the hassle that I would have to go through for re-opening my company again, if I chose to re-open it.

Any other reasons that people think I should leave my company dormant?

many thanks!

[SteelyDan]

What if, you closed it down, and pursued Plan B, but your wife set up a Co doing whatever you were doing under the original company - Co. in her name, same SIC, you became an employee of her Co., you get salary, she gets divs; all income the same as previous.

I'll stand back and await being torched...

[TheCyclingProgrammer]

So I would therefore be better off setting up a second Co and not registering that for VAT (unless/until I hit the threshold)?

It's weighing up if it's worth paying a second accountant for something that might not make money in its first year or so. Then again, running it through the same company would mean I would have to move away from FRS wouldn't it?

Make sure you're aware of the rules regarding VAT disaggregation and check that they wouldn't apply in your case:

Single Entity and Disaggregation « Steve J Bicknell

[Gaz_M]

If you are going to be selling direct to the public (or to entities who aren't VAT registered) then you may well be better off not being VAT registered, since you will be 20% more expensive than anyone else who isn't registered.

So I would therefore be better off setting up a second Co and not registering that for VAT (unless/until I hit the threshold)?

It's weighing up if it's worth paying a second accountant for something that might not make money in its first year or so. Then again, running it through the same company would mean I would have to move away from FRS wouldn't it?

[TheFaQQer]

This is what I envisaged I would do until I stumbled across this thread.

The problem with running two companies is paying two accountant fees, whether to make NewCo VAT registered and where to take salary/divs/expenses from.

If you are going to be selling direct to the public (or to entities who aren't VAT registered) then you may well be better off not being VAT registered, since you will be 20% more expensive than anyone else who isn't registered.

[Gaz_M]

Just my opinion, but whilst closing down and starting NewCo for Plan B seems reasonable to me, continuing to put consultancy work through NewCo could jeopardise your ER claim.

Why not start NewCo, keep OldCo running for any consultancy work while you get Plan B off the ground, then liquidate NewCo when you decide to definitely call it a day with consultancy work (assuming Plan B is doing well)?

Unless you immediately need the funds there's no need to rush into shutting it down and you can still keep taking dividends while you build up NewCo.

This is what I envisaged I would do until I stumbled across this thread.

The problem with running two companies is paying two accountant fees, whether to make NewCo VAT registered and where to take salary/divs/expenses from.

[TheCyclingProgrammer]

Just my opinion, but whilst closing down and starting NewCo for Plan B seems reasonable to me, continuing to put consultancy work through NewCo could jeopardise your ER claim.

Why not start NewCo, keep OldCo running for any consultancy work while you get Plan B off the ground, then liquidate NewCo when you decide to definitely call it a day with consultancy work (assuming Plan B is doing well)?

Unless you immediately need the funds there's no need to rush into shutting it down and you can still keep taking dividends while you build up NewCo.

[Gaz_M]

During this year I (and my wife) will put the first part of my Plan B into operation. It's an ecommerce venture as opposed to what I do (IT Consultancy/Developer).

Now, I did aim to put it through the same company as my consultancy but thinking about it would I be better off closing my Ltd, taking ER and then setting up a new company to combine the two?

I would still be doing the consultancy part as well as the pair of us running the ecommerce venture. Would this constitute enough of a 'change' in what the business is for?

[stek]

Will I? If I create another business with a different SIC code would that qualify as a 'different business'?

I've heard of a few contractors getting a big sum in their account and then just squashing the company, and re-opening a new one...

Are there specific regs against 'Phoenixing'??

I see a train crash coming.....

[TheCyclingProgrammer]

Whats an 'MVL'? At what point does it make sense to close a company down, and at which point in the tax year? Are there are obstacles to setting up another company immediately afterwards?

Depends what the new company is for. Theres no obstacle per se but if you intend to continue doing the same thing under a new company you are essentially continuing to trade and your eligibility for entrepreneurs relief will be affected. You need to intend to stop trading for ER to apply to any capital distribution.

As Maslins says, if you did claim ER but continued to trade, HMRC could seek to apply the anti avoidance provisions in the TIS rules and you'd end up paying tax as if you'd taken a dividend instead. Plus penalties and interest.

[Maslins]

@BQF Google "transactions in securities" perhaps adding "liquidation" and you should find the anti avoidance legislation. It's basically there for cases where the underlying trade continues, just shifted from one Ltd Co to another.

As with so many things in this world it's very grey and open to interpretation. Some will suggest taking a couple of months off in between contracts is enough to consider the trade ceased and brand new one started. Others will suggest even a couple of years and doing largely different work before/after close you could still be caught. No useful case law as yet.

[northernladuk]

I've heard of people fudging their books and not paying any tax. Doesn't make it right. Try google and the search method I used above.

[BQF]

You cannot shut it down to gain a tax advantage and re-start doing exactly the same thing. You will fall foul of the aggressive tax avoidance and 'pheonixing'.

Will I? If I create another business with a different SIC code would that qualify as a 'different business'?

I've heard of a few contractors getting a big sum in their account and then just squashing the company, and re-opening a new one...

Are there specific regs against 'Phoenixing'??

[northernladuk]

Whats an 'MVL'? At what point does it make sense to close a company down, and at which point in the tax year? Are there are obstacles to setting up another company immediately afterwards?

MVL is Members Voluntary Liquidation. Loads of stuff on it on here..
https://www.google.co.uk/search?q=MV...CMWC7QaykoCAAg

It makes sense to shut your company down when you've done trading or at any other situation there is a business need to do so. You cannot shut it down to gain a tax advantage and re-start doing exactly the same thing. You will fall foul of the aggressive tax avoidance and 'pheonixing'.

[BQF]

Whats an 'MVL'? At what point does it make sense to close a company down, and at which point in the tax year? Are there are obstacles to setting up another company immediately afterwards?