Reply to: MVL, entrepreneur tax relief and dividends

[kookachoo]

Thanks for the detailed input, very helpful.

I guess this raises one question - why is it more risky to sign a shareholders indemnity and receive the money almost immediately? As I have a very simple Ltd. and wouldn't expect HMRC to raise any claims.

Just follow what most people on this forum will tell you, including myself. Just pay the fee and appoint MVLOnline and don’t look back. This requires the hands of a professional and I was more than happy with their service.

[Maslins]

I guess this raises one question - why is it more risky to sign a shareholders indemnity and receive the money almost immediately? As I have a very simple Ltd. and wouldn't expect HMRC to raise any claims.

I feel my post above answers this. In practice, assuming you have taken and continue to take reasonable care, and the liquidator is legitimate, you should be fine. It's only if things were to go wrong somewhere along the lines you could be in a pickle.

[sira]

I can't speak for other providers. However, MVL Online goes through the normal liquidation best practices re this.

This includes:
- getting your company's bank to transfer funds to an estate account set up specifically for your case, rather than ask you to do so. This is why it's often about a month between appointment and first distribution.
- obtaining written clearance from HMRC that your company has met all its corporation tax/VAT/PAYE obligations. This is why it's currently often 4-6 months (painfully even slower for some cases at the moment due to Covid-19) until you get the balance.

Doing both the above minimises risk for you. No risk of you inadvertently sending funds to a scammer, or fat finger typo sending funds astray, where you'd have no protection due to you voluntarily instigating it yourself. No risk of HMRC raising a legitimate claim after the liquidator pays out funds, forcing the liquidator to invoke the indemnity you'd no doubt have signed, pursuing you for money back, and charging you for the privilege.

It does make it seem painfully slow unfortunately, as we rely on third parties actioning our requests. However, having discussed alternatives internally, we personally don't think they're viable due to the increased risks imposed on both liquidator and client.

Thanks for the detailed input, very helpful.

I guess this raises one question - why is it more risky to sign a shareholders indemnity and receive the money almost immediately? As I have a very simple Ltd. and wouldn't expect HMRC to raise any claims.

[Maslins]

I can't speak for other providers. However, MVL Online goes through the normal liquidation best practices re this.

This includes:
- getting your company's bank to transfer funds to an estate account set up specifically for your case, rather than ask you to do so. This is why it's often about a month between appointment and first distribution.
- obtaining written clearance from HMRC that your company has met all its corporation tax/VAT/PAYE obligations. This is why it's currently often 4-6 months (painfully even slower for some cases at the moment due to Covid-19) until you get the balance.

Doing both the above minimises risk for you. No risk of you inadvertently sending funds to a scammer, or fat finger typo sending funds astray, where you'd have no protection due to you voluntarily instigating it yourself. No risk of HMRC raising a legitimate claim after the liquidator pays out funds, forcing the liquidator to invoke the indemnity you'd no doubt have signed, pursuing you for money back, and charging you for the privilege.

It does make it seem painfully slow unfortunately, as we rely on third parties actioning our requests. However, having discussed alternatives internally, we personally don't think they're viable due to the increased risks imposed on both liquidator and client.

[sira]

I'm looking into choosing an MVL service at the moment.

I noticed that the time-frames vary wildy between providers; some can fully distribute the cash in 2-4 weeks and others mention that it takes 3-4 months (such as MVLonline).

Can anyone shed light on why this is?

[rickyrick]

When I closed my company down few years ago, the process started in January, the first CGT distribution was in one tax year and final distribution in the next year, this was not planned.

I contacted HMRC on how to complete the self assessment, CGT allowance could be used for both years. I claimed both ER & CGT for payments spanning two tax years without any comeback from HMRC.

Hi Eazy

I am doing exactly this at the moment, but when I called HMRC and ran through their IVR, it ended the call saying they cannot take calls at the moment.

Is there any info you can share with guidance on filling in the self assessment?

Kind regards

Richard

[katdan]

Thanks to both Maslins & northernladuk.

@Maslins, I guess I have no choice but to deal with my accountant eventually even if I have to pay for extra fees in additional to my monthly accountant fee :-(

[northernladuk]

Just paying him doesn't make him an employee by the way. If he was an employee you'd have to pay him NMW (unless he's a director of course) Just being pedantic

[Maslins]

@katdan your accountant will be best placed to help with this, as they'll have access to all relevant info. We can only go based on what you post, so potentially could be missing significant and relevant facts. However, I've tried answering your Qs based on what I anticipate is most likely:

1) Yes...though the annual exemption applies to any capital gains, not just those benefiting from ER. ER is relevant to reduce the tax rate on the gain above the exempt amount.
2/3) If you're director/co sec, then you don't need to worry about the employee bit. Ie you can stop taking a salary, but this won't stop you being director.

[katdan]

Qualifing condition for ER

Hi,

This is the first time I posted in contractor UK forum. Apologise if I haven't done it correctly. The information and tips posted in this thread are very useful.

I have a few questions on Entrepreneur Tax Relief and hope any of you can help me. My accountant is being a bit of a pain where she will charge me for every single question I ask :-(

My husband and I own a limited company (50-50 % shares between 2 of us). We're thinking to dissolve our company as my husband has accepted a PAYE contract (via an umbrella company) and I intended to look for a permanent position in the near future. Here are the questions I have for ER:

1) If we do qualify for ER, does this mean my husband and I will entitle to capital gain allowance of £12300 individually (e.g £24600 total for 2 of us)?
2) I read from various sites that we need to be an employee or director of the company to be qualified for ER. Due to my husband is about to start his new PAYE contract in next month, we're thinking that he should not receive any salary from our company going forward so he doesn't need to pay more tax. But does this mean he is no longer an employee and hence he will not qualify for ER claim?
3) Previously, my accountant advised to pay my husband £300 a month to prove he is still an employee. Can I just pay him £10 per month, or just one off directorship fee for his director work as a prove he is still a director in order to claim ER?

Thanks in advance.

Take care and stay safe.

[Maslins]

Once clearance is received from HMRC to distribute as capital, does the liquidator subtract any of the CGT or is that all paid through self assessment?

The latter. The liquidator typically won't have anything to do with your personal tax. They're just liquidating the company.

How soon do you normally find out if you're entitled to the relief after you make a claim?

You'll need to decide whether you're entitled to it or not, and submit your self assesssment tax return on that basis (remember that's basically what "self assessment" means, you are assessing your own situation). HMRC then have their normal window to enquire. 12 months if you've made full disclosure. 6 years if it's a discovery assessment (eg you didn't declare everything relevant, and they found out something significant from other means). 20 years in situations of fraud.

[SeededLoaf]

Once clearance is received from HMRC to distribute as capital, does the liquidator subtract any of the CGT or is that all paid through self assessment?

How soon do you normally find out if you're entitled to the relief after you make a claim?

[eazy]

Distribution Spanning Two Tax Years

When I closed my company down few years ago, the process started in January, the first CGT distribution was in one tax year and final distribution in the next year, this was not planned.

I contacted HMRC on how to complete the self assessment, CGT allowance could be used for both years. I claimed both ER & CGT for payments spanning two tax years without any comeback from HMRC.

[Maslins]

I read there is a need to get ID certified and sign a declaration in front of solicitor.

Out of curiosity, is this not a problem now with COVID-19? Anyone having issues with this?
Perhaps this can be done remotely by video chat?

The declaration of solvency needs to be witnessed by a solicitor, or commissioner of oaths. Afraid this is a strict legal requirement for the company to enter liquidation, not an arbitrary thing liquidators can be flexible on. It's not something where anyone of professional standing (accountant/teacher/doctor etc) can complete it.

Yes this is proving a problem during lockdown. Some solicitors are still doing it. We believe either via the low tech method of having a reasonably big room(!) and staying far apart, or by some kind of video system where they can watch you sign it, then get the original to counter sign, then give back.

There are no hard rules re the ID, so a lot more flexibility on that.

[Chart Accountancy]

I read there is a need to get ID certified and sign a declaration in front of solicitor.

Out of curiosity, is this not a problem now with COVID-19? Anyone having issues with this?
Perhaps this can be done remotely by video chat?

Cheers.

You can post the originals to your accountant to certify (if the accountant is chartered/certified).