Closing of Company (again)

[Maslins]

Interestingly this is what many property developers/traders used to do. It made sense, because a small group of shareholders would buy a plot of land or a property in a company, and then develop it for profit. The company would then sell the property and the company would then be liquidated for tax advantage. It worked because you might never have the same partners/shareholders for each project, and you could have multiple different projects (and hence companies) running at the same time. They could have had several liquidations a year!

I wonder how they work this now.

Maslins did you ever see contractors do this before TAAR was amended?

Re property developers, what I thought you were going to say is that many used MVLs before the tax laws change, and still do now, as tax isn't a main motivator. Some may question the ethics, but often property developers will create a company to do a building project, they sell the property, then liquidate it to minimise risk of comeback if in a year or two the property falls apart. Perhaps there are other positives of doing it, but I thought avoiding liability was a/the primary one.

Ummm...we never saw/helped with it first hand, but I am aware of some contractor accountancy firms who would encourage their clients to close down periodically. Often the/a main reason would be burying the old company from IR35 investigations. Legally it might be a bit flimsy, but it certainly makes it more expensive for HMRC to challenge someone for 5 years worth of trading if its gone through 2-3 companies, 2 of which are dissolved.

[ChimpMaster]

My understanding is that the 2 year TAAR stuff only applies to liquidations.

In reality, if you're just striking off, the tax at stake isn't that significant (as at most it can be on £24,999, so maybe something like £7k tax saving tops). For liquidations the tax savings can be in the hundreds of thousands.

There is still always the GAAR, but for a one off they'd never challenge this. Hypothetically if every year your company made profits of ~£74k, which you did as ~£8k salary, ~£42k dividends, then ~£24k paid out upon strike off...and you did this year in year out, then they might try to make an example of you.

Interestingly this is what many property developers/traders used to do. It made sense, because a small group of shareholders would buy a plot of land or a property in a company, and then develop it for profit. The company would then sell the property and the company would then be liquidated for tax advantage. It worked because you might never have the same partners/shareholders for each project, and you could have multiple different projects (and hence companies) running at the same time. They could have had several liquidations a year!

I wonder how they work this now.

Maslins did you ever see contractors do this before TAAR was amended?

[Maslins]

My understanding is that the 2 year TAAR stuff only applies to liquidations.

In reality, if you're just striking off, the tax at stake isn't that significant (as at most it can be on £24,999, so maybe something like £7k tax saving tops). For liquidations the tax savings can be in the hundreds of thousands.

There is still always the GAAR, but for a one off they'd never challenge this. Hypothetically if every year your company made profits of ~£74k, which you did as ~£8k salary, ~£42k dividends, then ~£24k paid out upon strike off...and you did this year in year out, then they might try to make an example of you.

[ChimpMaster]

For the sake of the very remote possibility of HMRC doing you over for the tax due on the (to them, miniscule) amount of £9k, I don't think it's even worth worrying about enough to post a question on a forum.

But anyway, you're not making a claim for ER, so the 2 year rule is not relevant.

[WTFH]

Having taking permanent employment in the process of closing the company. There is about 9k of retained profit in there. My accountant is advising to close the company and take the profit as a capital gain, given the amount this will be tax free. If I do this, and if I went back into contracting, would I be restricted from opening another ltd company within 2 years of closing? They seem to think the rules wouldn't apply as it could be argued I wasn't intending to go back into contracting

(Obviously I am, but HMRC don't know that)

Well, if you choose to go back within the 2 year window, just go through an Umbrella.

[JoJoGabor]

Having taking permanent employment in the process of closing the company. There is about 9k of retained profit in there. My accountant is advising to close the company and take the profit as a capital gain, given the amount this will be tax free. If I do this, and if I went back into contracting, would I be restricted from opening another ltd company within 2 years of closing? They seem to think the rules wouldn't apply as it could be argued I wasn't intending to go back into contracting

(Obviously I am, but HMRC don't know that)