LTD Closure - most tax efficient way?

[arby]

Have you read http://forums.contractoruk.com/accou...ast-while.html - might be an option?

[TheFaQQer]

So, if I want no stress/worries re. HMRC, am I do be paying 45% on the £450k? Ouch!

Why do you want / need the money? If you don't actually need the lump sum then you may be best to not take money from the new company for a while and gradually pay out the £450k as dividends over the next several years. Build up your £1 million in the new company and then worry about how to get that out then...

[TheFaQQer]

UAT - never heard of it.

Nor has my client

[Maslins]

Late to the party...

To advise I'd want to know a bit more about the situation with regards to the two companies. Yes they're both in IT, but do they both have the same ownership? If so, begs the question why do you have two in the first place?!

If there's a good reason for you having two companies, then potentially MVLing one would be a viable strategy. If the only reason for having two is you had lots of assets in one, want to extract that, so started up a new Co while you think about it, then MVLing probably isn't a viable option.

If you do fall foul of the transactions in securities rules and liquidated, then my understanding is the distributions would be dividends, so ER is irrelevant. Therefore they would be subject to your marginal rate of dividend tax (probably 38.1% on the bulk of it), not 20% CGT.

Re the two "schemes" you mentioned:

- nothing particularly contentious about EIS...but this is a tax relief for people investing money. So in itself it wouldn't help you get the money out of the old company, just may be a way that you could spend a hefty chunk of that money in a certain way that then negated some of the tax sting.

- UAT - never heard of it. May be valid, may be dodgy, I don't know.

[ChimpMaster]

Need an accountant to verify, but I would think you'd pay 20% CGT rather than dividend tax, if you liquidated. You just can't claim ER, as far as I see it.

Why do you need the funds? If you're looking to invest then could you change the SIC and re-purpose the company for the investment (for example property development/BTL)? That way you wouldn't need to extract the funds and pay tax, only to then invest the remainder.

[whatwhatwhat]

Sorry for the delay guys. Really appreciate the input thus far.

Yes, the 2 ltd's are running concurrently right now, and they're both in the IT sector, so it's now clear it's a no-go.

So, if I want no stress/worries re. HMRC, am I do be paying 45% on the £450k? Ouch!

[ChimpMaster]

Sorry guys, missed an important point I guess! I have another company running which will continue to run - it's just this one specifically that will be closing.

Does that stop me from the "MVL" option?

Cheers

Yes this complicates matters somewhat.

So you have 2 IT contracting companies running concurrently? Some contractors have a Ltd Co per contract they take on. They cite limited risk as the reason. Regardless of the reason, the likelihood is that you won't be able to claim ER if you have another IT company running.

If your other Co is not IT related, then it shouldn't be a problem claiming ER so long as you're prepared to accept the 2 year rule.

[TheFaQQer]

around £450k of profits lying in the account

I'm currently 30...

Sickening

[Patrick@Intouch]

It does depend a little on what you are currently doing also.

If you are currently employed or carrying on activity in the same or a similar trade or activity then it may not be possible to treat any distribution as capital gains, which would preclude entrepreneur's relief.

You may be able, technically to treat this as a capital distribution and claim entrepreneur's relief if you are employed as HMRC's current guidance states that employment is not included within the definition of "same or similar trade or activity". Their guidance can change at any point however and HMRC could seek to overturn this treatment if applied.

If they did and were successful in doing so then any distribution would be treated as dividend income.

[whatwhatwhat]

Are you continuing to trade in the same industry as before?

Define "best" - least risk? most take home? Because the approach to get the "best" will differ depending on what you really want.

How much money do you need to live on from the company? Do you have a pension plan? Has it existed in the past? How close to retirement are you?

There are lots of variables to consider.

Yes, continuing to trade in the same industry.

By "best" I probably mean least risk, since I just don't want to live in fear, or worry about what could possibly arise somewhere down the line.

It's not so much as what I need to live on - I'd just like to withdraw and have the company closed, so that I know what I've got the 'play with'. Sorry if that comes across as a bit vague/stupid!

I don't need a pension plan - I'm currently 30...

Thanks!

[whatwhatwhat]

MVLOnline

So long as you're not looking to contract again within the next 2 years.

Sorry guys, missed an important point I guess! I have another company running which will continue to run - it's just this one specifically that will be closing.

Does that stop me from the "MVL" option?

Cheers

[TheFaQQer]

Are you continuing to trade in the same industry as before?

Define "best" - least risk? most take home? Because the approach to get the "best" will differ depending on what you really want.

How much money do you need to live on from the company? Do you have a pension plan? Has it existed in the past? How close to retirement are you?

There are lots of variables to consider.

[ChimpMaster]

MVLOnline

So long as you're not looking to contract again within the next 2 years.

[Louisa@AardvarkAccounting]

If you have those amounts of profits still left in there, if you don't plan to close this Ltd and start another one, MVL is most likely the best route and discuss if you are eligible for Entrepreneur's Relief (effectively 10% tax on withdrawing the profits).

You are best to speak to an expert in MVL's though to go through your circumstances in full.

I'd recommend MVL Online - Chris Maslin

[whatwhatwhat]

Hi All,

First time poster so apologies if any Q's get asked regularly!

I'm looking to close my LTD at the end of this month, having not traded for the past 3.

After corp tax has been paid (will pay before end of June), there will be around £450k of profits lying in the account, which I'd like to withdraw personally.

I've been put in touch with "tax experts" by my accountant, but I'm a bit worried about some of the schemes etc they're mentioning, and the horror stories I've then read online to be brutally honest!

For anyone interested in what schemes have been put forward:

Umbrella Asset Trust (UAT)
Enterprise Investment Scheme (EIS) – no CT deduction

What would be the "best" way to withdraw this sum, and what could I come out with, by doing everything "by the books" so to speak, and not having to worry about HMRC coming after me for the next 5 years?

Any advice would be appreciated!