Reply to: Personal taxation on MVL distribution

[zappakat]

Couldn't agree more with @NLUK, no need to visit an office, all done remotely unless you feel the need to pop around for a coffee.

Would recommend giving Chris a call at MVLOnline, if you're more northern based can recommend another Chris at Fortis in Manchester who's dealt with a few of our guys.

Cheers Darren,

That's not North btw, I'm still another 2.5 hours drive further up than that

[zappakat]

Thanks Chris appreciate the response.

For the likes of NLUK, perhaps I'm just more the cautious type. But if I'm handing over my bank account to a 3rd person I'd prefer if they were fairly local so if there was an issue I could set-up a face to face meeting.
Rather that than hand over my finances to a random entity, have an issue, panic and get the train over there to find it's a rented office room and no-one has used it for months.

Thank God you pointed that out SueEllen, you set my mind @ ease.

[ChimpMaster]

Unsure specifically about IT contractor as opposed to other business types, but we've just taken on our 3rd case since we began that's above a £million.

Those are of course the minority. Cases are banded for insurance purposes, most common band for us is £50k-100k. We do quite a few at £25k-50k, but sometimes people in that position will "find a way" to get net assets just below £25k so they can get CGT treatment with a cheaper strike off, meaning they don't need someone like MVLO.

Good to know.

I will be quitting contracting later this year or early next.

Another few years and I might have been in that much coveted £million bracket

[minstrel]

MVLOnline Highly Recommended

I've used Chris at MVLOnline for an MVL and can highly recommend.

[Maslins]

Maslins, out of interest, what is the biggest MVL you've undertaken for an IT contractor?

Unsure specifically about IT contractor as opposed to other business types, but we've just taken on our 3rd case since we began that's above a £million.

Those are of course the minority. Cases are banded for insurance purposes, most common band for us is £50k-100k. We do quite a few at £25k-50k, but sometimes people in that position will "find a way" to get net assets just below £25k so they can get CGT treatment with a cheaper strike off, meaning they don't need someone like MVLO.

[ChimpMaster]

Maslins, out of interest, what is the biggest MVL you've undertaken for an IT contractor?

[Maslins]

I've looked at MVLonline but as you say "it's a lot of money" and they are based a long way from me. With a local firm at least I can go and check they do have a business office.
I'm also a bit wary of the first page of the form that asks for my bank account and sort code before I've even touched base with anyone.

Re bank details it's a valid concern which we didn't really consider until recently. We're currently in the process of changing the online form, so there'll be a much shorter one initially, that doesn't request sensitive info like bank details, and also doesn't request things that clients often seem to not know. We will still need all the info in the long run, but hopefully like you suggest if you've had a few exchanges with MVL Online you'd then be a bit happier divulging those extra more sensitive details. Hopefully from our perspective will also minimise the risk a client fills in 90% of the form, realises they don't know the answer to the final question, gets frustrated and decides to go with another firm that just asks for company name/email address to pick up the rest later.

Getting bank details for the company and shareholders is a key part of the liquidation though, as the main reason people get us involved is to get the money from their company's bank accounts into their personal bank accounts in a tax efficient way. Of course we need the bank details to do so.

Anyway, I'm sure whoever you are using will do a great job...and to answer your specific question, I think your main confusion surrounds whether the liquidator will actually pay any taxes for you. From this perspective there's two very separate sets of taxes:
- company taxes (CT, VAT, PAYE). These will need to be cleared before the liquidation can be closed (indeed with firms like MVLOnline they need to be cleared before the liquidation starts). If HMRC do make a claim on one of these taxes and you agree it's valid, then that would be paid by the liquidator from the company's funds.
- personal taxes. This is where your CGT and entrepreneurs relief come into play. The liquidator typically won't have anything to do with these. Distributions will be paid to you gross, then it's your responsibility to ensure they're declared appropriately on your personal tax return, and the relevant taxes paid. Not much different to dividends, a company pays you dividends and you then declare those on your personal tax return and pay personal tax where applicable.

[Louisa@AardvarkAccounting]

WRT to my MVL submission I've just engaged an MVL specialist so I don't expect a first round of disbursements for at least a couple of months, are we saying I should be expected to submit a return before April for something I may only receive in March?

If you have the distribution in the 2016/17 tax year (before 05/04/2017), this would go on your self assessment which is not due to HMRC until 31 January 2018.

If the distribution is on/after 06/04/2017 this would fall into 2017/18 and therefore give you until the following January.

[Darren at Fox-Bartfield]

MVL

Couldn't agree more with @NLUK, no need to visit an office, all done remotely unless you feel the need to pop around for a coffee.

Would recommend giving Chris a call at MVLOnline, if you're more northern based can recommend another Chris at Fortis in Manchester who's dealt with a few of our guys.

[northernladuk]

You want to go.in to their office to check? Ah how very 90's

[SueEllen]

I've looked at MVLonline but as you say "it's a lot of money" and they are based a long way from me. With a local firm at least I can go and check they do have a business office.
I'm also a bit wary of the first page of the form that asks for my bank account and sort code before I've even touched base with anyone.

The online part of MVLOnline equals online.

The guy who runs the company is an accountant who use to post on here and others have used them which is why they have been recommended.

I'm not sure what you mean by a business office.

[zappakat]

I'd be speaking to MVLOnline with that much on the line.

I've looked at MVLonline but as you say "it's a lot of money" and they are based a long way from me. With a local firm at least I can go and check they do have a business office.
I'm also a bit wary of the first page of the form that asks for my bank account and sort code before I've even touched base with anyone.

[TheCyclingProgrammer]

If you're a basic rate payer, is there even any need to claim ER? Isn't the basic CGT rate 10% now anyway?*

Either way, make sure you're not planning to start contracting again within 2 years of your distribution.

*Edit: ah, only if you're combined income and gains are below the higher rate income tax threshold.

[northernladuk]

I'd be speaking to MVLOnline with that much on the line.

[Neil@Intouch]

BTW Louisa thanks for the reply, still not sure I understand. If I use say 100k as an example (all debts paid), MVL costs 3k so leaving 97k.
If ER is 10% that leaves 87.3.
I declare that on a self-assessment do I then pay further tax on that?

If £97k was the distributed amount to you via MVL after everything has been settled, then this would be the sale value on the capital gains page on the tax return. The purchase price would be the share capital. You would then pay 10% ER on £97,000 less the share capital, if you qualify for ER as Louisa previously stated.