Continue to draw salary/dividends after stopping work??

[dazbear]

Thanks, I now feel a bit more informed before speaking with the accountant

I would like to keep the company going as I may end up after my 'break' and exploring other avenues that the "grass wasn't greener" after all and decide to pick up where I left off (ha).

Thanks for all of your advice

[Maslins]

I'd agree with chopper (disclosure I'm involved in MVL Online).

A liquidation would be a nice clean way to get rid of the company now, and get the funds into your hands relatively tax efficiently (probably about £4k tax). The liquidation itself will likely cost a grand or two, and also be aware the tax bill could be much higher if you were to return to a similar business within 2 years.

Or the drip feed option is there. If you stick to just dividends, you will have a decade before it'll be empty. Firstly, that's quite a lot of accountancy effort and hence costs (or hassle of you DIYing for a long time). Secondly, tax rules will almost certainly change...this could of course work either for or against you. Thirdly, depending upon what else you're doing, the dividends might not be tax free.

If you do go down the drip feed option, I'd recommend discussing with your accountant how you can speed it up. Eg you can likely justify a salary for a year and carry back the loss created by it, getting a bit of CT back, and also helping get the pot into your own hands quicker. Pension contributions are also an option. Also if you have literally no income independent of the company, then you should be able to take quite a bit more than £5k/year in dividend tax free, as you'll have your personal allowance too.

Finally worth mentioning if/when you get below £25k (again assuming current rules stay as they are) you can get CGT treatment with a cheap and cheerful strike off (ie no MVL required).

[Alan @ BroomeAffinity]

Could be classed as a close investment holding company, but there'll be no profits to tax so the tax rate is irrelevant, no?

[northernladuk]

There is not chance that something different might involve invoicing someone from time to time?

[dazbear]

Not old enough to retire - just having a break and then want to do something totally different.

So people don't see an issue with taking a dividend each year until the coffers are empty? I had heard that HMRC would take issue and class it as a CiC???

[Alan @ BroomeAffinity]

I can see that there might be an argument against paying a salary if there's no work being done but I'd suggest as a director you're entitled to it. Then there's the dividend.

That said, if you're retiring, or old enough to do so, paying into a pension which would instantly vest might be a better option.

[chopper]

Two options (well more than two, but these two are obvious).

1) Wind the business up using the MVL process, this involves paying someone like Members Voluntary Liquidation | MVL Online® some money to wind the business up, then you can pay yourself the remainder as a distribution, paying 10% capital gains tax. (You should quality for entrepreneurs relief).

2) Don't wind the business up, pay yourself £5000 a year tax free dividends for the next 9-10 years. You will incur some costs in keeping the business alive for those 9-10 years, of course. You should be able to find a friendly accountant who will do the statutory filing stuff cheap enough if all it is doing is dishing out its capital in dividends every year without actually trading, who wont charge you too much for this. (Or do it yourself, of course).

[dazbear]

After 7 years I am planning on stopping work in August. There will be around £50,000 retained profits in my ltd company at this point.

The idea was to continue to draw down a small salary (or through dividends) over a number of years until the pot is empty.

I have signalled this to my accountant and just had a 'we need to talk' email back! The trouble is he just talks accountanteese in our meetings and I end up more confused - so thought I would ask you guys to be forearmed when I do meet him.

What would be the issues with my plan? A bit of research suggests that my company could be classed as a CIC, but further investigation only seems to suggest that I wouldn't be entitled to small company CT rate - which doesn't exist any more.

Any ideas before I attend the Headteachers office? (ha).

He has said in the past that I would always have to do 'some work' to keep the company out of trouble /

Thanks

D