Company funds question

[Maslins]

Based on the extra info, sounds to me like MVL is the best option for you.

Personally I'd disagree with Cirrus's final bit of advice (at least the threat part). Let's say they don't give you the info you're looking for, so you sack them. Then what? You're likely left with a situation of a company you don't want to do much more, but there's a few loose ends to tie up before it'd be ready for most of the low cost liquidation firms out there. That situation isn't a particularly appealing prospect for another accountant to take on, as:
- they'll still need to do all the red tape admin stuff of onboarding a client,
- they'll want to understand a bit of the history and future, to ensure they agree it's a good idea and there's not some possible little extra bit of info not mentioned here that might make the plan daft. If they're the one who ends up holding your hand through it, it's likely you'd try to hold them responsible if it all went Pete Tong.
- but...you'll likely not want to pay them much as from your perspective you feel they're only doing a teeny tidy up exercise.

My view - by all means get a few other opinions from the internet, as you've sort of got 66% pro liquidation (33% jointly owns a liquidator firm), and 33% pro keeping the company ticking along. If you decide to go for liquidation, get your existing accountant to help with the company tidy up bits (see top half of the "How we work" tab on MVL Online website if you want an idea of the kind of tasks I'm talking about). If you decide to keep the company and dribble income over multiple years, then perhaps it makes sense to either switch to the cheapest firm you can find to hopefully do the basics (but unlikely offer much beyond), or learn how to DIY.

[Cirrus]

He who pays the Piper

my financial advisor about a pension payment however he didn't think it was either possible or a good idea, I don't specifically know why but I trust his advice. ...I just wish my accountant would sit down and do the necessary calculations rather than just fobbing me off to retain his fee.

Just ring them up and say they've got 30 minutes to make things crystal clear to you. Otherwise they're sacked.

[111Robin]

To be honest I'd be happy to take a salaried job if one came along so I'm not that bothered about the two year restriction. I have asked my financial advisor about a pension payment however he didn't think it was either possible or a good idea, I don't specifically know why but I trust his advice. When earning I always paid in the maximum allowable each year so I'm ok in this respect. Whereas I may not need the cash right this minute I do feel that the money would be better in my personal account. If I do enter into a business for myself it would likely be as a sole trader so I don't need the company account for that. It's obvious there is no definitive answer, I just wish my accountant would sit down and do the necessary calculations rather than just fobbing me off to retain his fee.

[dingdong]

The huge issue with closing the company down is that you can't go back to doing any similar work within 2 years so unless you are planning a change of career there are big risks to the ER approach.

Nobody yet knows how HMRC will interpret those rules and there is no case law. If they take a hard line lots of people who claim ESC will be in for a nasty shock years later when HRMC decide to focus on what people have moved on to do.

[TheFaQQer]

Personally, I'd rather have money in my bank account / investment account / property / under the mattress where I have some control over it and know what the taxation rules are than leave it in the company where they could change soon to make it much more costly to get the money out.

I wouldn't be surprised to see ER getting hit for PSCs (or whatever term the government uses to hit people like us), I wouldn't be surprised to see additional taxation for close companies, and I would be wanting to get the money into my hot little hand sooner rather than later.

[Maslins]

I am hopeful of new contract work however I wouldn't be too bothered if I closed the company and had to start again later. I'm 50 so quite a bit away from pension age. The company account has roughly £60k in it. Continuing with salary payments and dividends that maintain income below higher tax threshold the funds will probably be drained in a couple of years so is it better to pay accountancy fees for this period or take a hit with the taxation if I close the company ?.

If you were to liquidate, you'd be looking at a little over £1.5k costs, plus a little under £5k personal tax (making a few assumptions). You'd therefore end up with £53-54k in your pocket. If you then get a PAYE role elsewhere, doesn't matter.

If you keep the company going, short term you can perhaps take ~£16k our per year (£8k salary + £8k dividends) without suffering any tax, assuming no other income. If you were to do other work that would need to be factored in, and potentially it could only make sense to take the dividend allowance (currently £5k). Plus you've got the accountancy fees.

If you're happy DIYing without the accountant, and are confident of not taking on a PAYE role, then will likely be a bit better to keep the company going. That also has the benefit that if you did get another contract role, happy days, you've got a company there ready and waiting. However, it does mean you retaining responsibility for your company for multiple more years, without the help of an accountant.

Alternatively if you don't need the cash now, may be worth looking at making a big pension contribution (if it wasn't that long ago the company had taxable income), get a bit of corporation tax back, then potentially close without needing an MVL.

[111Robin]

I don't really feel there's one "best" answer.

What are your plans/expectations for the future? Eg:
- are you hopeful of getting more contracting work soon?
- how near are you to state pension age?
- how much cash is in the company?

For a short period after income dries up the salary can be great as it'll not only typically be tax free for you, but can get corporation tax relief...but the latter is only true where there's profits to offset it against. You can carry back a loss one year, but no further under normal circumstances.

Some will same I'm biased, but assuming you don't expect new contract work imminently, I'd be inclined to close and take the cash with modest CGT implications. You're then free from the ongoing admin hassle of the company, and will have all the cash in your own hands soon to play with as you see fit.

I am hopeful of new contract work however I wouldn't be too bothered if I closed the company and had to start again later. I'm 50 so quite a bit away from pension age. The company account has roughly £60k in it. Continuing with salary payments and dividends that maintain income below higher tax threshold the funds will probably be drained in a couple of years so is it better to pay accountancy fees for this period or take a hit with the taxation if I close the company ?.

[111Robin]

I would keep the company. It costs next to nothing. Stop paying the accountant. You can calculate your PAYE with free online apps (pay yourself once at the end of the year). For your annual returns just copy the format your accountant has used. I did this for a few years.

Thanks, that does sound sensible. I think I'm paying around £1500 annual accountancy fees that I think is too much considering I'm not trading. If I could cut that out I'd be much happier to keep the company running incase work picks up again.

[Maslins]

I don't really feel there's one "best" answer.

What are your plans/expectations for the future? Eg:
- are you hopeful of getting more contracting work soon?
- how near are you to state pension age?
- how much cash is in the company?

For a short period after income dries up the salary can be great as it'll not only typically be tax free for you, but can get corporation tax relief...but the latter is only true where there's profits to offset it against. You can carry back a loss one year, but no further under normal circumstances.

Some will same I'm biased, but assuming you don't expect new contract work imminently, I'd be inclined to close and take the cash with modest CGT implications. You're then free from the ongoing admin hassle of the company, and will have all the cash in your own hands soon to play with as you see fit.

[Cirrus]

I would keep the company. It costs next to nothing. Stop paying the accountant. You can calculate your PAYE with free online apps (pay yourself once at the end of the year). For your annual returns just copy the format your accountant has used. I did this for a few years.

[111Robin]

I operated as an engineering contractor on a ltd company basis for a number of years. The last contract I had ended two years ago and since then, due to the oil industry downturn, I have had no further contract work. I have not had any other form of income during this period apart from a very small salary drawn through the company. My question is, am I better to keep the company running and take these salary payments (and dividends as advised by my accountant) or wind up the company ?. My issue is that I keep asking my accountant the same question however I don't feel that he is really making an effort to calculate the best option with regards tax payments, his fees etc. as obviously he wants to retain my business. If anyone can offer advice it would be greatly appreciated. I just want to know which option is the most financially advantageous.
Thanks,
Robin