Reply to: to close company or not to close company?

[Lumiere]

When you finish your travelling take a permanent role.

I think the "loss" from being permanent rather than a contractor may well offset possible savings from ETR

[JB3000]

I have decided to go travelling a three months. My current ltdco has been in operation for about 5 years and currently has 60K in the bank account.

If you were in my position would close the company down and take entrepreneurs tax relief at 10%?

With div tax coming in in the near future it seems like a good idea.....

When you finish your travelling take a permanent role.

The last thing you want to do is contract again so quickly and end up paying hector a juicy 25% on £60k (rather than a more sensible 10%).

[pr1]

What?

Tax avoidance is the legal usage of the tax regime to one's own advantage to reduce the amount of tax that is payable by means that are within the law.

[Scruff]

https://youtu.be/B2B1of3OXSs

[northernladuk]

you would be avoiding paying more tax (you'll pay less than if you took it all out as a dividend)

What?

[pr1]

Well...I woudn't be closing it down to avoid tax .... and wouldn't be avoiding tax full stop as i would be paying the ET so all above board and legit.

Not sure exactly how long I will be travelling so not much point in keeping the company going at all in my view....don't want to the hassle of doing accounts while I am travelling

you would be avoiding paying more tax (you'll pay less than if you took it all out as a dividend)

[hgllgh]

I wouldn't close the company down, but that's just personal.

Not sure that shutting down your company to avoid tax will make tax investigation less likely. I would have thought the opposite, if anything.

Perhaps it can me made dormant or mothballed for a while to avoid accountancy fees? Or do the accounts yourself? It must be reasonably easy with no trading going on.

Well...I woudn't be closing it down to avoid tax .... and wouldn't be avoiding tax full stop as i would be paying the ET so all above board and legit.

Not sure exactly how long I will be travelling so not much point in keeping the company going at all in my view....don't want to the hassle of doing accounts while I am travelling

[unixman]

I wouldn't close the company down, but that's just personal.

Not sure that shutting down your company to avoid tax will make tax investigation less likely. I would have thought the opposite, if anything.

Perhaps it can me made dormant or mothballed for a while to avoid accountancy fees? Or do the accounts yourself? It must be reasonably easy with no trading going on.

[northernladuk]

IMO there's your defence. Be good if you could evidence that in the meantime as well.

[hgllgh]

With contracting going the way it's going are you absolutely sure you are going to go contracting again? Isn't the three month break a chance to get away from contracting and re-think your career because you've had enough. Both very difficult to disprove

To some extent maybe ... I really want to try to get into the entrepreneur thing and have tried a few times without much success but have learnt lessons along the way. I just can't see myself going back to permiedom...its too inflexible...

[hgllgh]

What do you anticipate doing upon your return? If the honest answer is "setting up a new Ltd Co to do very similar work through to the old one" then you'll be at risk of the transactions in securities legislation biting. Not aware of anyone being challenged on it so chances are even if you did exactly that nobody would bat an eyelid...but the risk is there.

If I were in your shoes? I'd probably go for it, but I'd do something other than contracting through a Ltd Co on my return.

thanks for the heads up on that!

Do you mean do something like go umbrella for a while?

(Not sure I could go back to permiedom now ... i like the flexibility of contracting too much)

[northernladuk]

With contracting going the way it's going are you absolutely sure you are going to go contracting again? Isn't the three month break a chance to get away from contracting and re-think your career because you've had enough. Both very difficult to disprove

[Maslins]

What do you anticipate doing upon your return? If the honest answer is "setting up a new Ltd Co to do very similar work through to the old one" then you'll be at risk of the transactions in securities legislation biting. Not aware of anyone being challenged on it so chances are even if you did exactly that nobody would bat an eyelid...but the risk is there.

If I were in your shoes? I'd probably go for it, but I'd do something other than contracting through a Ltd Co on my return.

[hgllgh]

My accountant just got back to me with the folowing ... "If you are going to return to contracting after a few months, it would be better to keep the company open as there is everything set up for it and has a trading history with Companies House and HMRC"

hmmm..... i wonder how much of that is due to wanting to keep the monthly accountancy fee going!

Also closing the company down may help to mitigate an IR35 investigation as it might be less likely. (I know this isn't 'officially' the case but in reality there may be some truth in this.) I am pretty confident on IR35 anyways but if I can reduce the chance of having to go through the hassle of an investigation then closing the company down 'may' help....

[northernladuk]

it's not your accountant who'll pay the bill!

What???