Reply to: MVL question...distribution in specie?

[Lance]

I don’t want to ignite an argument, nor do I want to claim that it’s possible or not. Personally, I wouldn’t be comfortable with this option anyway.

As this has been mentioned to me by two different tax advisors, should I challenge them?

Thing is... what is a tax advisor?
It’s not a profession with qualifications. There are no regulations or regulators.


Financial advisors are regulated. Tax lawyers are regulated. Accountants may be regulated.
Some tax advisors might be lawyers, financial advisors or accountants, but it’s not mandatory.
anyone can setup as a tax advisor and sell bad advice.

[northernladuk]

I don’t want to ignite an argument, nor do I want to claim that it’s possible or not. Personally, I wouldn’t be comfortable with this option anyway.

As this has been mentioned to me by two different tax advisors, should I challenge them?

Until it's challenged in court then it's just their opinion. Tax advisors also suggest film companies to the the stars and create Umbrella schemes etc so they aren't infallable and their opinion on a matter may not always align with HMRC's at the end of the day.

Bottom line is, claiming a tax benefit and then doing it again within two years is going to attract the wrong attention and if HMRC's intention is to stop people shutting companies, claming benefits then starting again you can bet your bottom dollar they'll challenge anything that doesn't meet their guidance regardless of what tax advisor thinks.
Paying it back and then carrying on is just a questionable loophole that brings a lot of risk and pain with it.

[northernladuk]

I was specifically referring to the option of contracting via through an umbrella company after an ER distribution. Given you are treated as a PAYE employee via the umbrella, I assume there is no issues with TAAR?

Correct. You aren't in the same business, you are now an employee.

[bcontractor]

Not really.
Claiming that you can break TAAR rules and simply pay additional tax is not true.
It might be true in some cases, but each case would be considered on its own merits. Possibly in a tax tribunal. Possibly, albeit unlikely, resulting in a stretch at her majesty’s pleasure if tax evasion can be demonstrated.

Edit: can’t see highlighted sections on an iPhone so I might be answering a different point. Not deleting this though as it seems a common theme recently.

I don’t want to ignite an argument, nor do I want to claim that it’s possible or not. Personally, I wouldn’t be comfortable with this option anyway.

As this has been mentioned to me by two different tax advisors, should I challenge them?

[DaaaaaaaaaaN]

Not really.
Claiming that you can break TAAR rules and simply pay additional tax is not true.
It might be true in some cases, but each case would be considered on its own merits. Possibly in a tax tribunal. Possibly, albeit unlikely, resulting in a stretch at her majesty’s pleasure if tax evasion can be demonstrated.

Edit: can’t see highlighted sections on an iPhone so I might be answering a different point. Not deleting this though as it seems a common theme recently.

I was specifically referring to the option of contracting via through an umbrella company after an ER distribution. Given you are treated as a PAYE employee via the umbrella, I assume there is no issues with TAAR?

[Lance]

MVL question...distribution in specie?

Is this part true?

Not really.
Claiming that you can break TAAR rules and simply pay additional tax is not true.
It might be true in some cases, but each case would be considered on its own merits. Possibly in a tax tribunal. Possibly, albeit unlikely, resulting in a stretch at her majesty’s pleasure if tax evasion can be demonstrated.

Edit: can’t see highlighted sections on an iPhone so I might be answering a different point. Not deleting this though as it seems a common theme recently.

[northernladuk]

Is this part true?

Of course. Oddly enough it's possibly the only valid one on that list. If you can't open another LTD this is your only option.

[DaaaaaaaaaaN]

A bit black and white and not what the op asked.

1. You can go back to contracting in a similar trade via LTD but be liable for a difference in tax.
2. You can go back to contracting in a (truly) different trade.
3. You can use an umbrella company.

Is this part true?

[NotAllThere]

bcontractor has been banned pending investigation. Further details may follow. Until then, thread locked.

Edit: Unbanned. However, his advice seems, on balance, to be dodgy.

[eek]

This is far. I said it based on that information I was given by my accountant and a tax advisor.

Ultimately, whether TAAR will apply to one’s specific case, is something that one can only decide for themselves, perhaps after receiving professional advice from reputable professionals.

Some people suggest a completely black and white approach (i.e. don’t trade for two years from the last distribution), which is totally understandable and the only 100% safe option. However, life always reserves surprises and can be unpredictable.

And we've covered a few of those surprises in the past.

The entire point is that when you MVL you need to have a good reason for why you don't expect to use another Limited company for a similar trade for 2 years.

[bcontractor]

There seems to be a few people suggesting that it’s OK to break the rules as long as you tell HMRC and pay the tax difference.
Whilst this may work, I’m not sure it’s a wise strategy.
I’m also not sure if it will work and is safe from further investigation.

On that basis, until someone provides real evidence to the contrary, I think the suggestion should to not do something that is explicitly legislated against.

This is far. I said it based on that information I was given by my accountant and a tax advisor.

Ultimately, whether TAAR will apply to one’s specific case, is something that one can only decide for themselves, perhaps after receiving professional advice from reputable professionals.

Some people suggest a completely black and white approach (i.e. don’t trade for two years from the last distribution), which is totally understandable and the only 100% safe option. However, life always reserves surprises and can be unpredictable.

[Lance]

We are starting to get a trickle of people who've made a mistake MVL'sing and now reaslising they can't go back contracting for two years so worth a check point to ask.
At least I didn't give him questionable advice so how about you FO?


You sure about that? Inform HMRC and pay the tax back maybe (big maybe) but not a 'different tax'

There seems to be a few people suggesting that it’s OK to break the rules as long as you tell HMRC and pay the tax difference.
Whilst this may work, I’m not sure it’s a wise strategy.
I’m also not sure if it will work and is safe from further investigation.

On that basis, until someone provides real evidence to the contrary, I think the suggestion should to not do something that is explicitly legislated against.

[northernladuk]

A bit black and white and not what the op asked.

We are starting to get a trickle of people who've made a mistake MVL'sing and now reaslising they can't go back contracting for two years so worth a check point to ask.
At least I didn't give him questionable advice so how about you FO?

1. You can go back to contracting in a similar trade via LTD but be liable for a difference in tax.
2. You can go back to contracting in a (truly) different trade.
3. You can use an umbrella company.

You sure about that? Inform HMRC and pay the tax back maybe (big maybe) but not a 'different tax'

[bcontractor]

Hi all...

First time poster, wondering if anyone can please help?

I am looking at doing a MVL like many contractors currently. It looks like that there are two distinct price points.

Many liquidators offer a lowest price of around £1k + disbursements + VAT which requires the contents of the company bank account to be distributed to the shareholders prior to the liquidation date, and then a distribution in specie takes place upon liquidation.

The next price option is around £2k + disbursements + VAT, and the liquidator takes control of the company bank account, distributing approx 75% of the cash upon liquidation, and the rest a couple of months later after HMRC approval. This can often take a lot longer (read about additional delays with banks currently on these forums).

Was just wondering what the pros and cons of each are as it is sometime hard to get a straight answer out of providers trying to sell their service. Do HMRC have any problems with the cheaper version?

Appreciate all your help.

There are a few threads on the topic already, some quite recent. Have a look, they'll probably help you. My understanding (confirmed by what I've read and by some liquidators) is that distributions in species are fine. The specific liquidators should be able to advise whether there is something specific to your situations that might make it incompatible.

[bcontractor]

You really sure you want to liquidate? No going back to LTD contracting for two years.

A bit black and white and not what the op asked.

1. You can go back to contracting in a similar trade via LTD but be liable for a difference in tax.
2. You can go back to contracting in a (truly) different trade.
3. You can use an umbrella company.