Reply to: winding up my company

[badgernumber1]

to answer some points:

Of course it is money-boxing, but as stated by a PP the change in the rules this year have not clamped down on that, only phoenixing. And as I have been running my LtdCo for 32 years and the sum in question amounts to approx 1K for each year of operation, it's hardly TTP.

Maybe HMRC don’t need further legislation in order to address money-boxing(?)

Anyway some respondents to the consultation seem to feel it will be targeted. E.g. those 'finding it unfair not to allow a retiring shareholder to exit a company with capital'.

I'm aware of no official published reassurance that retiring shareholders won't be caught though the summary responses doc says HMRC will 'publish guidance on the rules and will pay particular attention to the areas of uncertainty highlighted by the responses'.

Wish you the best Tim. Pain in the neck to have this stuff coincide with your retirement.

Quotes above may be better viewed in context:
https://www.gov.uk/government/upload..._responses.pdf

[TheCyclingProgrammer]

Another thing to consider is if tax avoidance being the primary motivation is one of the main factors and each case is judged on its on merits then IMO it would be hard to argue that doing a few extra days work on payroll to help wrap things up with a client and then stopping shows an intention to continue trading and you're only shutting down for tax reasons.

[Maslins]

And finally, I do know the difference between being "in trade" and being "in employment", I just wondered whether the new rules differentiated?

Well, that's the bit that unfortunately nobody's 100% clear on.

The guy behind the consultation's view was that going into employment in a similar role could be considered doing a similar activity (and in your case it sounds like it's basically exactly the same thing you'd be doing pre/post cessation of company trade). However, he also said in that situation it'd be unlikely that tax avoidance would be considered a primary motivator.

But still...all you're going to get is people's opinions, and on this forum it seems a bit split. It's not really your accountant's fault, I'm an accountant and I have my view, but some people who have read exactly the same things I've read have a different view. It's the unfortunate ambiguous world of tax here.

[tim123]

to answer some points:

Of course it is money-boxing, but as stated by a PP the change in the rules this year have not clamped down on that, only phoenixing. And as I have been running my LtdCo for 32 years and the sum in question amounts to approx 1K for each year of operation, it's hardly TTP.

And it wasn't intended on being phoenixing, I genuinely did expect to stop work from March 31, it is only as a favour to the client that it became April 30.

Why did I come here for advice, well where else is there? I have been posting here for a long time (even if I have been away for a bit) and it is full of the most helpful people. My accountant is useless on these things, she doesn't keep up to speed and gets all uppity when I try and tell her about what I have heard on t' 'net - cos it's just a load of know-nothings discussing the weather and she is the "professional". She seems to forget that she is a professional accountant and the things that I try and tell her have been posed by professional lawyers, but it doesn't help - too late to change, not been a real problem until now.

And I know this is a problem of my own making, I don't need to be kicked when I am down.

And finally, I do know the difference between being "in trade" and being "in employment", I just wondered whether the new rules differentiated?

thanks everybody

tim

[TheCyclingProgrammer]

Think my accountant views phoenixing as any case where there is 'activity' which would be caught by the new TAAR.

That isn't an unreasonable, albeit conservative/cautionary position given the ambiguity of the proposed legislation. So your accountant is neither right or wrong on this one. It's still a case of wait and see I think.

[Maslins]

FTFY

If only...we did better out of it in the early days, but now some of the "big boys" have joined in with much bigger marketing budgets than us, and I'd also say pretty questionable (though it seems not illegal) anti competitive tactics. Eg a very well known contractor accountancy firm that has a sister MVL company charging double what we do...but if client wants liquidation elsewhere the accountancy firm charge an additional £1k fee for (virtually non existent work) liaising with other liquidator.

All's fair in love war and business...but it don't half make me feel sick sometimes.

[TheCyclingProgrammer]

It doesn't? Stop doing stuff for money... then do it again for money... How is that not continuing to trade in any sense? You mean the fact it's PAYE?

And cockup number three is cocking up twice and then coming to a bunch of strangers on the internet for advice. Don't forget to leave some space for cockup 4 onwards.........

Under that argument, being employed would be trading. It's not. And if they were on PAYE this would surely make them an employee?

The issue here isn't the "trading" aspect of the new rules but the "activity" wording which makes them so ambiguous. So either way there's no clear cut answer but have the new rules even come into force yet?

[northernladuk]

..but for the time being, subject to phoenixing anti avoidance rules, I'm going continue lighting cigars with £50 notes.

FTFY

[Maslins]

I really don't see MvLs being around in the long-term as an option for contractors. In fact, I'm amazed it's been around this long.

I'd agree with the first part...but bear in mind arguably the MVL market is only due to a previous tightening up by HMRC. Pre 1 Mar 2012 if you had a (contractor or otherwise) company with a big pot of cash you were looking to close, you'd ask HMRC nicely for ESC C16 to apply, then would get CGT treatment with a cheap and cheerful strike off.

So whilst the MVL market is fairly new (~4 years now), it's certainly not a new loophole, just a bit more cost/effort required to get to a beneficial situation which was previously available.

...but yes, when setting up MVL Online we were very aware that in itself it was a one trick pony made viable due to change in tax law, and that at some point it would be killed off just as easily. Exactly when that day will be is anyone's guess...but for the time being, subject to phoenixing anti avoidance rules, it's still a viable option.

[jamesbrown]

FWIW whilst the consultation did mention money-boxing (ie allowing a big pot of cash to build up in a company, over and above the working capital requirements) as something that annoys them, there wasn't any suggestion of doing anything about it immediately.

It's lead to other discussions (which at least for the time being are nothing more than discussions) about taxing small Ltd Cos more like sole traders. Ie owner taxed on profits, regardless of whether they distribute funds out of the business to the owner or not. Can't see that happening in the foreseeable future, indeed if it were to be brought in, sure there would be a huge amount of discussion beforehand.

Yeah, they've been talking about this in the press recently, notably here (although this may have been briefed from the OTS review, so a common source):

Revenue considers dusting down 1970s-style business tax - FT.com

TBH, I wouldn't be surprised to see this in the medium/long-term (i.e. the next 5-10 years). One question is how they would deal with the employer's NI; it would be totally unreasonably to "look through" the corporate entity and still impose corporate taxes. Another possibility is that they introduce new entities, such as an FLC variant or a sole trader with limited liability. I really don't see MvLs being around in the long-term as an option for contractors. In fact, I'm amazed it's been around this long.

[badgernumber1]

Your account understands that this isn't really Phoenixing though right?

Think my accountant views phoenixing as any case where there is 'activity' which would be caught by the new TAAR.

[Maslins]

You sure HMRC won't consider you guilty of money-boxing and tax your distributions as dividends anyway? Even if you're retiring? FWIW, my accountant's advising that this ought not to be the case, but opinions again vary in this respect.

FWIW whilst the consultation did mention money-boxing (ie allowing a big pot of cash to build up in a company, over and above the working capital requirements) as something that annoys them, there wasn't any suggestion of doing anything about it immediately.

It's lead to other discussions (which at least for the time being are nothing more than discussions) about taxing small Ltd Cos more like sole traders. Ie owner taxed on profits, regardless of whether they distribute funds out of the business to the owner or not. Can't see that happening in the foreseeable future, indeed if it were to be brought in, sure there would be a huge amount of discussion beforehand.

[northernladuk]

Your account understands that this isn't really Phoenixing though right?

[badgernumber1]

W.r.t. the new rules, no one yet seems clear whether permanent employment constitutes continuation of trade. E.g. my accountant says their 'understanding' of phoenixing is such that you're not guilty 'where you go into employment'.

You sure HMRC won't consider you guilty of money-boxing and tax your distributions as dividends anyway? Even if you're retiring? FWIW, my accountant's advising that this ought not to be the case, but opinions again vary in this respect.

The government consultation response states that HMRC will publish information (e.g. example cases) to help clarify this area. Are you committed to liquidate yet?

P.S. Check this out: http://forums.contractoruk.com/accou...-umbrella.html

[northernladuk]

the second mistake was, after agreeing with my accountant that we were going to wind up the company at YE 2106 the client decided that he needed a few more days work from me - so I got the agency to PAYE me for those dates.

So does this count as "continuing to trade"?

I know that it doesn't in the normal legal sense of the word, but does it for this specific legislation?

It doesn't? Stop doing stuff for money... then do it again for money... How is that not continuing to trade in any sense? You mean the fact it's PAYE?

And cockup number three is cocking up twice and then coming to a bunch of strangers on the internet for advice. Don't forget to leave some space for cockup 4 onwards.........