Starting a new Ltd company for selling mobile apps. Will it count as phoenixing?

[eek]

I disagree with a lot of the posts above. I think HMRC would view this as being the same or a similar trade. It is software development, albeit with a different marketing mechanism. Condition C is deliberately wide and the guidance about it is deliberately vague (CTM36325). For example:

https://www.icaew.com/-/media/corpor...-guidance.ashx

CTM36325 - Company Taxation Manual - HMRC internal manual - GOV.UK

However, the two-year period within the TAAR is not symmetric in the sense that two years is enough but less than two years is not definitively "not enough" (all conditions must be met).

For example, if you were employed for a year and then made redundant, you would have a pretty reasonable case for passing condition D.

Thus, I think you would be at risk regarding C, but you might be able to make a reasonable case regarding condition D.

It is definitely not clearcut, though, so you would need to accept that risk.

+1 for me it's software development and therefore the exact same trade (the only thing that differs is marketing and sales approaches and that doesn't change the trade type at all).

[Lance]

I think reasonable people can disagree about both C and D, but I am quite confident that you are wrong about how HMRC will see condition C. I am confident that they would see it as being a similar trade. This can be seen from the broad drafting and from the vague guidance given in their examples. The legislators want condition C to be interpreted broadly. The change of trade needs to be *definitive* for condition C to be clearly not met. In other words, unless you have a very good case with regard to condition D, I think you're undoubtedly at risk. At risk doesn't mean caught, it means a lot of worry and hassle in the unlikely event that it's investigated. Is it worth it? Only the OP can decide that.

Indeed. The OP has to decide.

[jamesbrown]

I still don’t agree. Selling a product on an App Store is NOT software development.
Software development is a pre-requisite for this but so it is for almost any industry nowadays.

There is always some risk but I don’t see this as a case to be overly concerned about.
Especially as it’s not gonna make much, if anything for quite a while.

I think reasonable people can disagree about both C and D, but I am quite confident that you are wrong about how HMRC will see condition C. I am confident that they would see it as being a similar trade. This can be seen from the broad drafting and from the vague guidance given in their examples. The legislators want condition C to be interpreted broadly. The change of trade needs to be *definitive* for condition C to be clearly not met. In other words, unless you have a very good case with regard to condition D, I think you're undoubtedly at risk. At risk doesn't mean caught, it means a lot of worry and hassle in the unlikely event that it's investigated. Is it worth it? Only the OP can decide that.

[Lance]

I disagree with a lot of the posts above. I think HMRC would view this as being the same or a similar trade. It is software development, albeit with a different marketing mechanism. Condition C is deliberately wide and the guidance about it is deliberately vague (CTM36325). For example:

https://www.icaew.com/-/media/corpor...-guidance.ashx

CTM36325 - Company Taxation Manual - HMRC internal manual - GOV.UK

However, the two-year period within the TAAR is not symmetric in the sense that two years is enough but less than two years is not definitively "not enough" (all conditions must be met).

For example, if you were employed for a year and then made redundant, you would have a pretty reasonable case for passing condition D.

Thus, I think you would be at risk regarding C, but you might be able to make a reasonable case regarding condition D.

It is definitely not clearcut, though, so you would need to accept that risk.

I still don’t agree. Selling a product on an App Store is NOT software development.
Software development is a pre-requisite for this but so it is for almost any industry nowadays.

There is always some risk but I don’t see this as a case to be overly concerned about.
Especially as it’s not gonna make much, if anything for quite a while.

[jamesbrown]

I disagree with a lot of the posts above. I think HMRC would view this as being the same or a similar trade. It is software development, albeit with a different marketing mechanism. Condition C is deliberately wide and the guidance about it is deliberately vague (CTM36325). For example:

https://www.icaew.com/-/media/corpor...-guidance.ashx

CTM36325 - Company Taxation Manual - HMRC internal manual - GOV.UK

However, the two-year period within the TAAR is not symmetric in the sense that two years is enough but less than two years is not definitively "not enough" (all conditions must be met).

For example, if you were employed for a year and then made redundant, you would have a pretty reasonable case for passing condition D.

Thus, I think you would be at risk regarding C, but you might be able to make a reasonable case regarding condition D.

It is definitely not clearcut, though, so you would need to accept that risk.

[TheCyclingProgrammer]

Whether or not it is caught by the TAAR for company winding up depends on condition C and D. Condition D relates to whether or not the company winding up was mainly done to gain a tax advantage - you could argue this doesn't apply if you were simply ending your consulting business. Condition C is:

At any time within the period of two years beginning with the date on which the distribution is made –

The individual carries on a trade or activity which is either the same as the company or very similar
The individual is a partner in a partnership which continues with the original company’s trade or activity
The individual is involved with the continuation of such a trade or activity by a person connected with the individual

The key part here is whether or not the new business is a trade or activity that is the same or similar to the previous one. It will likely hinge on this. IMO selling apps you develop for yourself on the App Store is not the same as consulting/contracting for other people BUT - and this is the key bit - if you were investigated you'd need to convince HMRC of this. Will they understand the difference or will they just lump it all together as "software development". Nobody can really say.

If I were you I'd probably not worry about it too much but be mindful that it's not 100% risk free because of the broad wording of the rule.

[Fred Bloggs]

I would have thought at least six months as a sole trader would be appropriate before incorporating for a venture such as this.

[ladymuck]

I'd consider starting as a sole trader initially, while you test the market, and if it takes off set up a company and transfer the assets to it.

I'd say bum on seat software development for a client is a different business to application for sale development for yourself but I'm no expert in how HMRC would look at these things.

[northernladuk]

I disagree.
Anti-phoenixing rules are to prevent a specific set of circumstances. Not to block enterprise.
Developing and selling an app is a very different business to selling your arse.

Although whether starting a LTD for this port of venture is the best way to do it is a very different question.

And I'd actually agree with that what with the point regarding the change to selling from consultancy.

[Lance]

How did you close the company? Did you have over 25k in it and gained a tax advantage from closing it or did you just divi it out till it was empty and closed it?

If it was the later just open a new one and carry on.

If it's the former then you can't open another for two years.

I'm surprised this question isn't asked a lot more with people knee jerk closing their companies to be honest.

I disagree.
Anti-phoenixing rules are to prevent a specific set of circumstances. Not to block enterprise.
Developing and selling an app is a very different business to selling your arse.

Although whether starting a LTD for this port of venture is the best way to do it is a very different question.

[Lance]

Hi all!

I have switched to permanent employment early this year and have since liquidated my Ltd company for contracting.

I now want to start a mobile development business where I sell apps on the Google Play and App Store. I was thinking of creating a Ltd company for this. Will this qualify as "phoenixing" as they are from a similar industry (software development)?
I honestly just want to sell apps and get a side income from that and would not be working as a contractor under this new Ltd company.

Thanks!

should be fine.
You're making a product for sale not providing professional services.

[northernladuk]

How did you close the company? Did you have over 25k in it and gained a tax advantage from closing it or did you just divi it out till it was empty and closed it?

If it was the later just open a new one and carry on.

If it's the former then you can't open another for two years.

I'm surprised this question isn't asked a lot more with people knee jerk closing their companies.

[abbyw]

Hi all!

I have switched to permanent employment early this year and have since liquidated my Ltd company for contracting.

I now want to start a mobile development business where I sell apps on the Google Play and App Store. I was thinking of creating a Ltd company for this. Will this qualify as "phoenixing" as they are from a similar industry (software development)?
I honestly just want to sell apps and get a side income from that and would not be working as a contractor under this new Ltd company.

Thanks!