Originally posted by leo123
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Reply to: Best way to close Limited Company?
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Previously on "Best way to close Limited Company?"
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MVL route
Neither of the options you originally suggested would enable you to have access to the cash at bank anytime soon. I'm guessing that may not be a priority for you therefore.
However, if you would like to have the cash sooner an MVL might be appropriate. Distributions from an MVL are (generally) treated as capital and Entrepreneur's Relief [ER] may also be available (if eligible). Given that you and your wife each own 50% you can each make use of your annual capital gains allowance. [Capital Gains allowance currently £12,300.] The allowances, combined with ER, should significantly reduce or eliminate the tax due. You would of course need to pay an IP's (reasonable!) fees for the liquidation but it does also finish off the company neatly and relatively quickly and avoids further filing/accountancy costs.
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Originally posted by leo123 View PostRicky, thanks for this! However why would I need to sell my company (as that's what Entrepreneurs Relief for), if I could keep it open and pay tax-free salary + max possible tax-free pensions until all money runs out?
If the company stays open and does not receive any income, I presume I will not have to pay any corporate tax, right?
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All depends how much money you have in your business.
You can’t just keep your limited company open for years to pay your wife the same salary as she gets now. I mean, what exactly is she doing to warrant that, especially as you have no invoices, expenses or anything to justify this. Will be red flags to the tax man all over. You’ll also both need to complete self-assessment tax returns every years as directors of a limited company...oh and pay a retaining fee with the accountant to submit accounts over the year...plus IR35 Insurance..IPSE..etc etc
Obviously you both can’t take any more dividends.
If you have much more over £25k then MVL it quick hoping Rishi doesn’t screw everyone over ER/capital gains tax first. Stick the cash in an ISA or whatever.
The 2 year rule is just starting another limited company in same business..but you can go Brollie in that time, and swap over afterwards if outside IR35.
Or..using pensions is a decent option. If you haven’t put anything in for 3 years that’s 120k you can put away.
Under 25k, liquidise it.Last edited by BABABlackSheep; 12 August 2020, 11:37.
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Originally posted by leo123 View PostRicky, thanks for this! However why would I need to sell my company (as that's what Entrepreneurs Relief for), if I could keep it open and pay tax-free salary + max possible tax-free pensions until all money runs out?
If the company stays open and does not receive any income, I presume I will not have to pay any corporate tax, right?
You can close the company and take the cash out as capital. It's the reverse of what you did to start the company (you put >= £1 in as starting capital).
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Ricky, thanks for this! However why would I need to sell my company (as that's what Entrepreneurs Relief for), if I could keep it open and pay tax-free salary + max possible tax-free pensions until all money runs out?
If the company stays open and does not receive any income, I presume I will not have to pay any corporate tax, right?
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Originally posted by leo123 View PostHello!
After 8 years of contracting I moved to permanent, and I have some money left on the company bank account.
What would be the best way to save on taxes?
(I share the company 50/50 with my wife who is not working anywhere else and is receiving minimal salary + dividends from our limited company).
I thought of the following two options:
1. Keep the company and continue paying my wife just salary (and no dividends) until all company money runs out, and then close the company.
2. Transfer all company money to my and my wife's pensions now and close the company.
Will appreciate any advice and thanks in advance...
Leave a comment:
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Best way to close Limited Company?
Hello!
After 8 years of contracting I moved to permanent, and I have some money left on the company bank account.
What would be the best way to save on taxes?
(I share the company 50/50 with my wife who is not working anywhere else and is receiving minimal salary + dividends from our limited company).
I thought of the following two options:
1. Keep the company and continue paying my wife just salary (and no dividends) until all company money runs out, and then close the company.
2. Transfer all company money to my and my wife's pensions now and close the company.
Will appreciate any advice and thanks in advance...Tags: None
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