Reply to: Closing Ltd Company - Bit of a Mess & Advice Needed

[jamesbrown]

Woe betide anyone who gets involved in dual tax palavas. Yonks ago I was working as a permie and got some paid for advice from PWC. They produced a few pages of expert opinion that I pointed out was wrong after 10 mins of reading up on it. In the end I had to use the fingers in ears and hum approach and hope nothing came of it.

[Quindi]

First, I would look to see how you’d be taxed on dividends in your new country of residence. If they are tax free, that is probably the route to go, providing you plan to be non-UK resident for at least five full tax years (otherwise you may be taxable on the full amount in the year you return). Failing that, I see no reason why you couldn’t take a capital distribution and then claim ER on your personal tax return, but you should speak to a specialist. Sounds like your current accountant is pretty clueless (e.g. is unaware of MVL) or has described the process for striking off, rather than MVL (now a 25k limit for striking off, as this is no longer covered by an ESC).

Thanks James - and everyone else who has provided advice it really helps. If you know of any recommended or trusted MVL specialists then a link or DM would be much appreciated.

I am in Dubai so it is tax free and about the 5Y thing - you can never be truly confident in your future in Dubai but i dont have any intentions of moving back to the UK even if i had to leave here. Is it simply i am outside of the UK? e.g. if i move from a zero tax country to a taxed country in Europe.

Thanks

[rootsnall]

Right, it was a blindingly obvious loophole, so it was closed. Now, you have to be moving overseas and mean it, and even if you mean it, you could get caught out.

Woe betide anyone who gets involved in dual tax palavas. Yonks ago I was working as a permie and got some paid for advice from PWC. They produced a few pages of expert opinion that I pointed out was wrong after 10 mins of reading up on it. In the end I had to use the fingers in ears and hum approach and hope nothing came of it.

[jamesbrown]

They aren't thick. I know somebody who went to live in tax free country for 12 months ( pre 2013 ) to save a lot of tax.

Right, it was a blindingly obvious loophole, so it was closed. Now, you have to be moving overseas and mean it, and even if you mean it, you could get caught out.

[Quindi]

Gents - thank you very much for all of your advice and suggestions: it's a big help. If any of you have recommended or trusted MVL experts please drop me a link or DM.

I am in Dubai at the moment so it is tax free but you can never really be sure for long term plans (regarding James and the 5Y point) - however, i dont have intentions to move back to the UK even if this was to come to an end. Is the criteria simply a non-resident of the UK and not the country you are in? i.e. if i move from a zero tax country to a country with tax in Europe for example.

Again massive help guys - really appreciate it as it was starting to become a bigger worry for me.

[rootsnall]

It's anti-avoidance legislation surrounding temporary non-residence (since FA 2013, I think). It aims to stop you taking, say, a year out and receiving a capital or dividend distribution in a low-tax jurisdiction overseas and then returning to the UK. For the purposes of the anti-avoidance legislation, anything more than 5 years is considered non-temporary (and the 5 years doesn't necessarily have an intuitive calculation, IIRC). I believe it applies to both capital gains and dividend income. But don't just take my word for it, obviously, ask a specialist.

They aren't thick. I know somebody who went to live in tax free country for 12 months ( pre 2013 ) to save a lot of tax.

[jamesbrown]

Here's a link (covers income tax too):

HS278 Temporary non-residents and Capital Gains Tax (2019) - GOV.UK

Worth noting that any dividends paid from profits earned overseas during the period of temporary non-residence would be fine, but that isn't the discussion here.

distributions paid by close companies (or those that would be close, if they were UK resident) of which you are a material participator or their associate, in the case of distributions that are dividends, those out of trade profits arising in the temporary period of non-residence are not taxable - ‘Distributions’ includes dividend income received by a person abroad which you have power to enjoy, under the Transfer of Assets Abroad code (HS262)

[jamesbrown]

What James said.
However, check and see if you take dividend from UK company even in another country, do you have to pay Divi tax in UK. It is part of double taxation treaties between countries. E.g. Income from UK property is taxed in UK.
2. You as director must file satr. Not sure how to report Divi in this. Maybe some additional form to say you are not UK tax subject.

James, why the five years?

It's anti-avoidance legislation surrounding temporary non-residence (since FA 2013, I think). It aims to stop you taking, say, a year out and receiving a capital or dividend distribution in a low-tax jurisdiction overseas and then returning to the UK. For the purposes of the anti-avoidance legislation, anything more than 5 years is considered non-temporary (and the 5 years doesn't necessarily have an intuitive calculation, IIRC). I believe it applies to both capital gains and dividend income. But don't just take my word for it, obviously, ask a specialist.

[pscont]

What James said.
However, check and see if you take dividend from UK company even in another country, do you have to pay Divi tax in UK. It is part of double taxation treaties between countries. E.g. Income from UK property is taxed in UK.
2. You as director must file satr. Not sure how to report Divi in this. Maybe some additional form to say you are not UK tax subject.

James, why the five years?

[jamesbrown]

First, I would look to see how you’d be taxed on dividends in your new country of residence. If they are tax free, that is probably the route to go, providing you plan to be non-UK resident for at least five full tax years (otherwise you may be taxable on the full amount in the year you return). Failing that, I see no reason why you couldn’t take a capital distribution and then claim ER on your personal tax return, but you should speak to a specialist. Sounds like your current accountant is pretty clueless (e.g. is unaware of MVL) or has described the process for striking off, rather than MVL (now a 25k limit for striking off, as this is no longer covered by an ESC).

[ChimpMaster]

Sounds like you need a new accountant.

One that understands MVL/ER, or even better, one that understands non-resident UK tax.

[northernladuk]

Speak to Chris at MVLOnline to understand those options first. That is if he can put his glass of champagne down while steering his yaght in the Bahamas.

After that seek out specialist tax advice and understand that etc. Asking a bunch contractors about those figures isnt the way to go.

[rootsnall]

If you are genuinely going to be non tax resident for next full tax year then you probably have scope to make a killing tax wise. It sounds like you should keep the company going into the next tax year and pay it all as dividends once you are offshore. But as mentioned you need specialist advice. The problem will come if you don't stay non tax resident for the full tax year. I had a similar thing yonks ago and it got messy.

[BlasterBates]

I would ask your accountant. If ER is not applicable, it seems like paying yourself dividends every year is the most tax efficient approach, even if the company is not trading it doesn't necessarily mean you can't do this.

[wattaj]

...Accountant stated ER was more applicable on lower amounts approx £30k balances and closing the company with £400k would lose all dividends allowances so tax liability would be huge.

I think that there may have been some confusion here and that you should seek the advice of a specialist MVL provider.

[MVLOnline] Holding post for that nice MVLOnline chap to drop by. [/MVLOnline]