Reply to: MVL Still not complete after nearly 1 year - anyone else?

[dhauser]

Just had word from my liquidator that they've just received clearance from HMRC. 19 months that's taken.....

[sira]

In a strange turn of events, my MVL is now complete. Taken precisely 1 year.

[ChimpMaster]

Well I'm happy that the 2 year rule depends on distributions rather than waiting for the inept teams at HMRC before striking off the company. My distributions were very soon after the liquidation was initiated, so I only have another 18 months to wait

Vagaries in TAAR and in all things HMRC - yes I used to read these to death and in every single case HMRC would leave themselves a backdoor open. So if I were to advise anyone, it would simply be to be careful and get a professional involved.

One more thing: "intent" is something that shouldn't be ignored. I have seen and worked with this in property taxation and I believe it applies in this MVL/2 year discussion too.

BTW I do miss having these conversations with you guys. Life in permiedom is ... well... empty.

[jamesbrown]

There are many vagaries in the TAAR, but the rule surrounding work involving the same or a similar trade or activity is clear as day as it relates to the timing of a distribution, so I personally think you would be an utter cretin to break that clear-as-day rule given all the other vagaries in the legislation that are asking for test cases. Again, you are asking for trouble and it's also completely unnecessary when you can arrange for a 100% distribution upfront. Once HMRC have committed resources to an investigation, they are committed. I find your comments surprising in that regard. There are plenty of examples of cases opened by HMRC that really should've been closed quickly and are instead pursued to the bitter end (and then lost, obviously).

[Maslins]

Maslins, I think you severely underestimate the risk that, in the event of a clear breach of the TAAR, HMRC will not want to shine a spotlight on absolutely everything else you have done. That is how they operate. If the delay of the final distribution is a serious consideration at the time an MVL is started, then perhaps the person conducting the MVL might want to consider their underlying motivation for doing it and whether a company that distributes the full amount upfront might be a better option. Regardless, the simplest advice is to assume that you cannot re-incorporate until 2 years after the last distribution is received. In general, it is better not to sail close to the wind with these things because you are inviting a spotlight.

Re your first couple of sentences, I've seen zero evidence of that. HMRC don't have the resources, nor do I imagine they have the authority or inclination to go on fishing expeditions. Plus what exactly are you proposing they'd be delving into? Remember in this hypothetical situation:
- the liquidation would be done and dusted well over a year ago, old company fully dissolved in a formal, proper way, so realistically no scope to look into that.
- the individual in question has recently started a brand new company, hence no skeletons in closet there.
- so it'd seem the worst HMRC could do if they really wanted to would be to raise enquiries into a couple of personal tax returns.
Yes we agree they might challenge the CGT vs dividend treatment of final distribution as discussed earlier, but assuming the individual in question isn't dodgy generally, what else are they going to see/challenge? Again I appreciate we're in hypothetical scenario territory, but in most of these situations with the typical reader of this forum, it'd be someone who'd been working inside IR35/PAYE/via an umbrella for a year or two between liquidation and new company. They'll therefore likely have P60/P45 data. What are HMRC going to challenge there?

Re your final sentence, sure, I totally get a lot of people will have that view, and nothing wrong with it. If we're talking about holding fire on incorporating company 2 for a month or two, and you're reasonably confident the opportunity (or a very similar one) will be around then, yes, why risk doing it now.

It also seems like it's irrelevant for most of the people in this specific thread, as seems they all got 100% distribution reasonably early on in the process. Hence from a personal tax perspective, there is no relevance at all to the timing of finalisation of the liquidation. It is just annoying for all concerned to have the liquidation open indefinitely.

[jamesbrown]

Maslins, I think you severely underestimate the risk that, in the event of a clear breach of the TAAR, HMRC will not want to shine a spotlight on absolutely everything else you have done. That is how they operate. If the delay of the final distribution is a serious consideration at the time an MVL is started, then perhaps the person conducting the MVL might want to consider their underlying motivation for doing it and whether a company that distributes the full amount upfront might be a better option. Regardless, the simplest advice is to assume that you cannot re-incorporate until 2 years after the last distribution is received. In general, it is better not to sail close to the wind with these things because you are inviting a spotlight.

[eek]

Were you being chased asking HMRC via a freedom of information request for the average time for MVL validation for applications in each year from 2016-2020 should give you the information you needed to mitigate HMRC's argument.

Then provided the new company is 2 years + the average of the 2016-18 figures I don't think there would be any argument from HMRC.

[Maslins]

To my mind it's about risk. If you start a new similar business >2 years from the date of the first distribution, then seems we're agreed that first distribution should be safe. It's therefore only the final distribution (which we'll assume is a relatively modest figure compared to total net assets at time of appointing the liquidator) that's at risk.

Also when I say "at risk", if you want to be squeaky clean/risk free in a situation where you start a similar business >2 years post first distribution but <2 years post final distribution), you could always simply declare that final distribution as dividends in the first place. There's then nothing for HMRC to challenge. Yes you'll likely be paying more tax on that amount depending on other income that year etc, but again if the final distribution is low value relative to first one, you'll still have got the lion's share of the tax benefits from the liquidation as a whole.

Even if you did declare both as CGT, and HMRC challenged the latter one, I think you'd have a pretty good argument. You could clearly demonstrate the trade had ceased >2 years prior to starting the new company, liquidator appointment was >2 years prior too...indeed basically the only reason the final distribution was <2 years was due to HMRC being painfully slow to grant clearance. If it were me, I'd feel happy arguing that with a straight face/clear conscience, ie that what I'd done was not "a clear breach of the TAAR". Wouldn't guarantee I'd win, but again only the modest value final distribution amount should be at risk.

[jamesbrown]

FWIW this is our understanding too. Hence if the lion's share of funds are distributed soon after liquidator appointment, the delay to final distribution (whilst still annoying for all concerned) shouldn't have too big an impact.

I think that’s a weird way to look at it. You don’t want to be defending yourself against a clear breach of the TAAR - I doubt that would be a very pleasant experience. Better to operate on the basis that the clock starts ticking from the last distribution because it does (in terms of avoiding any breach).

[jamesbrown]

I thought each distribution was treated separately, with its own 2 years clock

Sure, but it’s the last one that matters if you’re not looking to get a distribution reclassified.

[Maslins]

I thought each distribution was treated separately, with its own 2 years clock

FWIW this is our understanding too. Hence if the lion's share of funds are distributed soon after liquidator appointment, the delay to final distribution (whilst still annoying for all concerned) shouldn't have too big an impact.

[luxCon]

It starts from the date that the last distribution occurred.

I thought each distribution was treated separately, with its own 2 years clock

[Manic]

Kicked off mine in Jan/Feb 20. HMRC validation was August. final closure this month.

[ContractorBanking]

So that's more like a 3-year handcuff, ouch.

I'm thinking of going down the MVL route, how long does it typically take for the first distribution and what % can you expect at this stage?

[jamesbrown]

Ooh...interesting. Does the 2 year clock start when HMRC acknowledge the process is complete?

It starts from the date that the last distribution occurred.