Reply to: Opening a new Ltd Co less than 2 years after MVL (but NOT claiming ER)

[ChimpMaster]

I find it useful to read the people who know about such things - say a person who has been doing MVLs for years such as

Correct indeed:

Condition C: at any time within the period of two years beginning with the date on which the distribution is made: yada yada yada

So that's good news. Only 22 months left before I can go contracting again, outside IR35 of course.

Got a call about an inside IR35 role, 450 Euros/day! Remote/home working, but still at that rate it works out worse than my permie job by some way.

[eek]

Doesn't the 2 year timeframe start from when the business is formally dissolved? So this would be several months after the distributions.

I find it useful to read the people who know about such things - say a person who has been doing MVLs for years such as

I think both. Ie if you were to start a new business >2 years from the first distribution but <2 years from the final one, then the first distribution would be safe, final one at risk.

[ChimpMaster]

Does the 2 years start from the first or the final distribution?

Doesn't the 2 year timeframe start from when the business is formally dissolved? So this would be several months after the distributions.

[DAR2008]

Perhaps your new Ltd company could have a line in floristry?

[jamesbrown]

I'm so sorry if I'm being dumb, but I still don't understand taking both distributions into account for the 2-year count.

I got my first distribution on June 2020. Second (and final) distribution was on Dec 2020. When is it safe to open a new Ltd Company?

December 2022.

[abbyw]

Each distribution separately.

I think both. Ie if you were to start a new business >2 years from the first distribution but <2 years from the final one, then the first distribution would be safe, final one at risk.

I'm so sorry if I'm being dumb, but I still don't understand taking both distributions into account for the 2-year count.

I got my first distribution on June 2020. Second (and final) distribution was on Dec 2020. When is it safe to open a new Ltd Company?

[jamesbrown]

Does the 2 years start from the first or the final distribution?

Each distribution separately.

[Maslins]

Does the 2 years start from the first or the final distribution?

I think both. Ie if you were to start a new business >2 years from the first distribution but <2 years from the final one, then the first distribution would be safe, final one at risk.

[luxCon]

I'd agree with many of the points above. Ie:
.....
.....
- I believe the 2 years would run from the distribution dates, as those are the relevant dates from a personal tax perspective.

Does the 2 years start from the first or the final distribution?

[Maslins]

I'd agree with many of the points above. Ie:
- if you're caught, ER (or BADR as it's now known) is irrelevant, the liquidation distributions would be taxed on you as dividends, they wouldn't be capital gains at all.
- whilst the 2 years is written into the rules, the other factors suggest this is a guide. If you were to start a new similar business within months, then it seems hard to argue you didn't have a reasonable idea that might happen when triggering the liquidation. If it were (say) 23 months later, I think you'd have a reasonable argument even though falling just short of the 2 years (though if in that situation if at all possible I'd recommend holding off another month to be more confident you're safe).
- I believe the 2 years would run from the distribution dates, as those are the relevant dates from a personal tax perspective.

[jamesbrown]

TBH, though, your situation would come across as a little bit shammy. Your last distribution was only a few months ago. I think you'll have to suck it up and go umbrella and perhaps you've learned a lesson. Don't MVL your company unless you are really very certain about not returning any time soon. There will be a lot of examples like this as people wet themselves over the IR35 reforms (rightly or wrongly).

[jamesbrown]

Condition C of the TAAR concerns carrying on the same or a similar trade or activity within two years of a capital distribution, so if you had two distributions, there will be a separate date for each one.

There is a school of thought that says the two-year rule has less than a literal interpretation. For example, if you've held a permie position that wasn't a sham to get around the TAAR, then there's a school of thought that says you could start a new company within 2 years. However, here be dragons IMHO, so you should get specialist advice and, even then, it's a risk.

[northernladuk]

Just to double-check, WHEN are the 2 years for TAAR counted from? When the declaration of solvency is filed? On final distribution? Help clarifying this please.

I would be when you declared would it not? Payment can happen anytime. Same as it is for dividends no?

[abbyw]

Just to double-check, WHEN are the 2 years for TAAR counted from? When the declaration of solvency is filed? On final distribution? Help clarifying this please.

[Lance]

Ah so if I declare them as dividend income, it will be taxed as such.

No it's free cash, tax free.......
/sarcasm

Of course it will be taxed as dividend.....

I haven't done calculations but I assume I would be a lot worse off tax-wise when it's a dividend.

No idea till you do the calculations....