Reply to: Divorce after 12 years contracting

[Maslins]

I asked my accountant whether I could apply to HMRC for clearance to set-up another company within 2 years, the response I got to closing it “will restrict you from going back into contracting for 2 years.”

Perhaps I was expecting too much from my them

Just to clear up a few things:
- There is nothing legally stopping anyone from closing one company and starting another.
- There is targeted anti avoidance rules (TAAR) which can bite if you're liquidating Oldco and setup Newco doing something similar within 2 years. This doesn't stop you restarting, but can alter the tax treatment you got when closing Oldco (meaning CGT rules no longer apply to it, instead it's taxed as a dividend).
- My understanding is this only applies when liquidating, not when striking off. Ie if you have £20k final net assets, strike off, restart same thing day after, you wouldn't be at risk from the TAAR.
- This does not mean I would encourage everyone to build up modest (£20k-24.9k) reserves and strike off every year or two. Firstly it would be a lot of effort for modest gain, and secondly it could be attacked by HMRC via GAAR (general anti abuse rules).

So in your situation, do of course ensure final company tax matters etc are tidied up, but then I see no issue with you taking the remaining ~£20k as capital gains (quite possibly entirely tax free if 50:50 owned and no other capital gains in the year), and you starting a new company immediately after as 100% shareholder.

[MrButton]

I asked my accountant whether I could apply to HMRC for clearance to set-up another company within 2 years, the response I got to closing it “will restrict you from going back into contracting for 2 years.”

Perhaps I was expecting too much from my them

I’d get advice from a specialist who deals with closing with MVL (Maslins?) rather than your accountant who might not know all the intricacies of it.

[flapping]

I asked my accountant whether I could apply to HMRC for clearance to set-up another company within 2 years, the response I got to closing it “will restrict you from going back into contracting for 2 years.”

Perhaps I was expecting too much from my them

[bstar1]

thank you for the responses. Closing the company and worrying less, seems like a more agreeable route to take.

This is all you need to do, I got proffesional advice closed my company and went back to an old employer inside IR35, under Umbrella, If the company is closed, there is no investigation on IR35 long as there was no fraud in terms of taxes etc etc.

[Maslins]

Over the last few weeks / months thinking about it all has given me a headache. Some really good responses here though, and now I'm feeling much more informed.

I've been putting a fair bit into my pension and so after corporation tax liabilities etc there will be around £20k left. Children will be shared between us 50:50.

If your company will have circa £20k final net assets, no MVL required, and I believe that means the anti avoidance rules cannot bite.

Get your accountant to sanity check your figures (ie £20k after trading has ceased and all no cash assets/liabilities cleared off). Be aware £25k is a fairly critical cut off here. If your figure is right, probably makes sense to avoid taking further dividends from now, as (assuming you/your wife make no other capital gains this tax year) they'd suffer more personal tax than taking the funds out upon closure. You should then be able to get that final £20k as £10k each, subject to CGT, but under your annual exemptions so completely tax free.

You can start up Newco, 100% owned by you.

NB I have zero clue re the divorce/child maintenance etc, so you may well find some of your current/future money/income will need to go to her/the kids too, the above is just the tax perspective.

[BlasterBates]

IR35 investigations usually start with a routine audit so if the company has already been closed down it will be highly unlikely.

[flapping]

I would definitely say the targeted anti-avoidance rule would not bite in this situation. The reason for closing the company is in no way tax motivated.

So definitely close the company, use an MVL if effective, and move on.

.

Am liking the sound of that. I’ll get the accountants view too

[northernladuk]

Maslins' will probably be able to advice more accurately, but if its only 20k after liabilities then there could possibly be more appropriate ways to distribute the remaining company funds, also I could be wrong but whatever the pension amount is might/will need go into the pot as well..

WB gnarly

[gnarledcontractor]

Over the last few weeks / months thinking about it all has given me a headache. Some really good responses here though, and now I'm feeling much more informed.

I've been putting a fair bit into my pension and so after corporation tax liabilities etc there will be around £20k left. Children will be shared between us 50:50.

Maslins' will probably be able to advise more accurately, but if its only 20k after liabilities then there could possibly be more appropriate ways to distribute the remaining company funds, also I could be wrong but whatever the pension amount is might/will need go into the pot as well..

[craigy1874]

I would definitely say the targeted anti-avoidance rule would not bite in this situation. The reason for closing the company is in no way tax motivated.

So definitely close the company, use an MVL if effective, and move on.

[flapping]

Over the last few weeks / months thinking about it all has given me a headache. Some really good responses here though, and now I'm feeling much more informed.

I've been putting a fair bit into my pension and so after corporation tax liabilities etc there will be around £20k left. Children will be shared between us 50:50.

[WordIsBond]

Open to debate, but I'd have thought changing shareholding due to divorce would be considered a pretty good non-tax reason for closing Oldco and opening Newco. Ie I reckon a decent chance they could get beneficial tax treatment even if he starts doing a similar thing soon after as sole shareholder.

I had the same thought. The two year rule is there for a reason but it isn't absolute because of the other conditions.

[Maslins]

Agreed. If OP wishes to continue contacting, he will have to close existing company without using MVL and ER,

Open to debate, but I'd have thought changing shareholding due to divorce would be considered a pretty good non-tax reason for closing Oldco and opening Newco. Ie I reckon a decent chance they could get beneficial tax treatment even if he starts doing a similar thing soon after as sole shareholder.

No guarantees...but possibly worth a clearance application? I had thought HMRC had advised they wouldn't offer these, but we've defo had at least one MVLO client confident HMRC had approved their situation (came up mainly as there was confusion over the clearance we apply for vs what they already had).

Only relevant if the OP has fairly hefty reserves. If all funds are consistently cleaned out with pensions/divis then this may be irrelevant.

[gnarledcontractor]

Doesn't this depend on how much money is in the company and how it will be extracted? He might fall over by not being able to open a new one within 2 years if MVL and ER are involved.

I would have thought that regardless of not being able to open a new company for 2 years - dissolving the company and decreasing the complexity of the settlement with the ex would be the correct way to go?

As we've no further information about whether there are children involved - if there aren't then a clean break divorce splitting what's left after an MVL (and either going perm or working through a brolly for 2 years) would, IMHO, be a sensible way to ensure that the divorce remains amicable and allow OP to move on in an equitable way..

[GhostofTarbera]

Bite her hand off for 50%, settle before her new fancy man or friends tell her she can easily get 80% and leave you living in a puddle


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