Reply to: is it legitimate to close ltd & use umbrella

[Steptoe19]

Check

Go for it then, it's your arsehole receiving the inevitable red-hot poker....

Sjd told me the same, I’d check again though

[Lance]

I am also trying to establish whether it would be ok to close a Limited Co using an MVL and claim Entrepreneurs Relief but then work on a PAYE basis through an umbrella company.

I’m sure you can do this BUT will Hmrc come after you to pay additional tax 35% on top of the 10% ER tax paid on the funds you released from your ltd company?

It all seems to be a grey area. Do we have any updated advice on this?

Many Thanks in advance.

It's not grey. Yes you can.
As NLUK says, you do potentially limit your future options though.

[northernladuk]

Don't forget you've stuffed your long terms plans if you close the company and benefit form a sweet tax deal. You can't Re open another within 2 years so if the inside gig goes tits up in 2 months you are stuck with brolly even if the next gig is outside.

We've at least one example of this happening already.

[Jgltd]

Tax expert advice on subject

I am also trying to establish whether it would be ok to close a Limited Co using an MVL and claim Entrepreneurs Relief but then work on a PAYE basis through an umbrella company.

I’m sure you can do this BUT will Hmrc come after you to pay additional tax 35% on top of the 10% ER tax paid on the funds you released from your ltd company?

It all seems to be a grey area. Do we have any updated advice on this?

Many Thanks in advance.

[NickX]

One update to my post from ~16 months ago is that since then HMRC did basically clarify that someone going permie would be safe. I would have thought umbrella was safe too...but as you can see from earlier in this thread, the rules are indeed grey and not everyone agrees how they'd be interpreted.

Thanks very much for the reply. That is fairly positive, but I agree that there is still likely to be some variations on how the rule is interpreted.

[Maslins]

I am also trying to establish whether it would be ok to close a Limited Co using an MVL and claim Entrepreneurs Relief but then work on a PAYE basis through an umbrella company.

It all seems to be a grey area. Do we have any updated advice on this?

Many Thanks in advance.

One update to my post from ~16 months ago is that since then HMRC did basically clarify that someone going permie would be safe. I would have thought umbrella was safe too...but as you can see from earlier in this thread, the rules are indeed grey and not everyone agrees how they'd be interpreted.

[NickX]

Is it legitimate to close ltd & use umbrella so that to cash out the lump sum on ltd company bank account?

I am also trying to establish whether it would be ok to close a Limited Co using an MVL and claim Entrepreneurs Relief but then work on a PAYE basis through an umbrella company.

It all seems to be a grey area. Do we have any updated advice on this?

Many Thanks in advance.

[Boo]

I don't see the point of asking on here if you have had advice from a professional contracting accountancy company.

Well, one point would be in order to hear other people's opinions (including other accountants who also sometime post here). Another might be to take the chance to ask other associated questions or to hear people's experiences or just generally chat about related matters.

But it's an accountancy / legal forum so whatever the O/P's reason the question is on topic...

Boo

[Maslins]

Playing devils advocate, when people close and go permie that is deemed acceptable, what difference is there between a permie and an umbrella?

I don't think it's been unanimously accepted that going permie in this instance would be safe (my personal view is it would be).

I guess it could be argued that permie and umbrella were different in this situation. I accept that from the perspective of the worker, permie and umbrella are similar, and Ltd Co very different. However from the end client's perspective, a permie is an integral key part of the time, who gets a salary, employee benefits etc. An umbrella worker is a contractor, negligibly different to a Ltd Co contractor, just that they pay the invoice of a big organisation rather than multiple individuals.

As others have suggested above, nobody's view is really any more/less valid than anyone elses. I would've thought both are quite safe (yes some might argue I'm biased...but I try not to be). I'm aware many others don't share my view.

Disappointing that there continues to be new tax rules that are so open to interpretation.

[LondonManc]

Playing devils advocate, when people close and go permie that is deemed acceptable, what difference is there between a permie and an umbrella?

Indeed. When engaged as an umbrella contractor, you're a permatemp, surely?

[SimonMac]

Playing devils advocate, when people close and go permie that is deemed acceptable, what difference is there between a permie and an umbrella?

[jamesbrown]

I don't see the point of asking on here if you have had advice from a professional contracting accountancy company. Unless you'd rather believe Johnny Noquals and take his opinion over SJD's stance?

This really isn't something for an accountant. Anyway, no one can provide a definitive answer at this stage.

[LondonManc]

I don't see the point of asking on here if you have had advice from a professional contracting accountancy company. Unless you'd rather believe Johnny Noquals and take his opinion over SJD's stance?

[dingdong]

And nobody knows what tax inspectors will start doing in 2 years from now when they pick up on your self assessment return where the ER is finally claimed. Be prepared for a horrendous tax bill.

Until there is precedent and established procedures I don't think anyone should be considering ER at this point if they are planning on switching to permie or umbrella for a similar role or industry.

[ChimpMaster]

I don't see the point of you going through a liquidation and claiming ER now, only to then use an umbrella and pay income tax (up to 45%) plus NI on all of your earnings.

If you know you're returning to contracting imminently, then continue to use your Ltd. Who knows, your new contract might only last 3 or 4 months and you can then reconsider options then.

Just so that you're aware, liquidation takes several months to complete.