ER and MVL in the next few months?

[Jeremy @ Silva Insolvency]

MVL distributions

Once appointed the liquidator will write to all creditors and will advertise for any claims against the company. When the liquidator feels comfortable that funds are available to cover all claims s/he can consider distributing surplus funds to shareholders. (This process can sometimes be accelerated where the shareholders are willing to indemnify the liquidator for any distributions s/he makes.)

There is no reason for a liquidator to hold onto funds s/he doesn't need and normally shareholders want their funds as quickly as possible. Normally the bulk of funds are distributed pretty quickly. We normally hold back some funds until the HMRC clearance comes through just in case something unexpected turns up.

If you want to hold back some distributions to take better advantage of CGT allowances I think you'll find most IPs will work with you on that but it's best to check with the IP beforehand.

[jamesbrown]

In this case it looks like it is sufficient to leave £12,300 for the next tax year as anything above will be taxed linearly as CGT.

Hm... so why do people say the process can take around 6 months + some are waiting for HMRC decision if the relevant date is that when liquidator transfers the capital distributions?

I think the liquidators typically distribute the first (larger) distribution, then await HMRC approval (which can take 6 months or perhaps even more right now), then distribute the second (smaller) distribution when approval has been obtained. Not exactly sure what happens w/ the first distribution if approval is held-up/not granted for some reason, but I guess that is highly unlikely. In practice, you may have only limited control on when the two distributions are received, particularly the second one. However, insofar as you can control it, there is value in using your CGT allowance in each of two years. All this stuff is best confirmed w/ your liquidator though.

[ConcernedCitizen]

The liquidator has nothing to do with ER, which is a personal tax relief. The liquidation gives you capital treatment, but ER is requested via your SATR (it is generally a formality though). If the distributions are received by 5 April, then you'd apply for ER on the SATR for the current tax year, otherwise two separate tax years. The advantage of distributing across two tax years is that you can use two sets of CGT tax free allowances (of course, that only helps if you don't have other gains that exceed the allowance).

In this case it looks like it is sufficient to leave £12,300 for the next tax year as anything above will be taxed linearly as CGT.

Hm... so why do people say the process can take around 6 months + some are waiting for HMRC decision if the relevant date is that when liquidator transfers the capital distributions?

[jamesbrown]

I like how positive people on here are on the timelines. No major changes in October is a popular opinion in general but I'm considering all scenarios.

So... assuming "some unfavourable (as definitely will not be favourable!)" CGT change from next tax year is it sufficient that liquidator distributes the money by 05 Apr 2020? I.e. would that date be sufficient to qualify for 20% CGT with ER on top? Or does ER has to be somehow approved by HMRC to get the extra 10% back?

The liquidator has nothing to do with ER, which is a personal tax relief. The liquidation gives you capital treatment, but ER is requested via your SATR (it is generally a formality though). If the distributions are received by 5 April, then you'd apply for ER on the SATR for the current tax year, otherwise two separate tax years. The advantage of distributing across two tax years is that you can use two sets of CGT tax free allowances (of course, that only helps if you don't have other gains that exceed the allowance).

[ConcernedCitizen]

I like how positive people on here are on the timelines. No major changes in October is a popular opinion in general but I'm considering all scenarios.

So... assuming "some unfavourable (as definitely will not be favourable!)" CGT change from next tax year is it sufficient that liquidator distributes the money by 05 Apr 2020? I.e. would that date be sufficient to qualify for 20% CGT with ER on top? Or does ER has to be somehow approved by HMRC to get the extra 10% back?

[ChimpMaster]

No chance.
Too many Tory voters with capital.
ER might go quite soon as it doesn’t really work as intended though.

expect IT and VAT rises at next budget. Any maybe a superficial CT increase.

Not sure where you've been or what you're reading but there is zero change of IT or VAT increase.

There probably won't be any tax rises until the economy has bottomed out. At this stage of the economic cycle it makes more sense for the government to take all the zero-percent lending being thrown at it by the BoE.

Tax rises won't happen until late 2021 if that, and then they'll target the usual CGT and threaten with 'wealth taxes' so that the middle class can truly be killed off.

[ChimpMaster]

We need Pooper on this thread. He'll call it right.

There's more chance of Maggie Thatcher coming back to life and raising Income Taxes in the Autumn budget than finding Pooper in a professional forum actually providing anything of value.

[northernladuk]

We need Pooper on this thread. He'll call it right.

[jamesbrown]

No chance.
Too many Tory voters with capital.
ER might go quite soon as it doesn’t really work as intended though.

expect IT and VAT rises at next budget. Any maybe a superficial CT increase.

No chance. Aside from the manifesto promises, these would be the silliest taxes to increase during a recession and there are much lower hanging fruit for serious revenue, specifically tax relief on pensions for higher rate tax payers. They won't be increasing any of the major taxes, including taxes on employers, until much later. If anything, they will cut employer's NI or increase the employment allowance in the near-term.

I doubt ER will disappear soon. An increase in the headline CGT rate is more likely.

[Lance]

ER was already nerfed in the previous budget. I doubt it will be an immediate target again.

CGT on the other hand is very likely to be brought in line with income tax sooner rather than later, though possibly in Spring 2021 rather than Autumn 2020.

No chance.
Too many Tory voters with capital.
ER might go quite soon as it doesn’t really work as intended though.

expect IT and VAT rises at next budget. Any maybe a superficial CT increase.

[ChimpMaster]

ER was already nerfed in the previous budget. I doubt it will be an immediate target again.

CGT on the other hand is very likely to be brought in line with income tax sooner rather than later, though possibly in Spring 2021 rather than Autumn 2020.

[ConcernedCitizen]

Long time reader, first time poster. The forum is the best source of information but this is recent so haven't been able to find the relevant thread.

Essentially, I have woke up to the reality of what might be happening soon with the ER and CGT reforms to pay for all the Covid-19 spending.
Assuming they both get substantially changed in a) October b) March budget is there any point in starting the MVL process now or is it too late? (I have an option to continue for maybe a few more months before work dries up with the contract deemed as Outside by an independent legal opinion which is why I haven't closed earlier).
Ideal case scenario is claiming ER on any retained profit, second best case is at least paying the CGT at the current rates. CGT seems like a potential target combined with the government's plan to tax flexible workforce out of existence - perm roles actually appear attractive now compared to what umbrellas are offering.
I.e. if by some miracle the liquidator transfers the money out of the business account before the October budget does it mean current rules would still apply?