Closing a Company - what's your exit strategy?

[Maslins]

Ensure you'll be able to offset any new losses in the current accounting year against some profits, otherwise you won't get CT relief on the big pension contribution. There is more flexibility for losses in final years, but if you've been making losses for multiple years you may be limited.

Also bear in mind that assuming you do get CT relief, and you currently have £40k net assets, you'd need to put more like £20k into a pension to end up sub £25k net assets. Reason being you should get 19% of the pension contributuion back as CT relief, so £20k would only end up reducing net assets by £16.2k.

You should be able to get an MVL for a simple cash only case for about half what you've been quoted, and that's all in (ie including statutory advertising/bond costs and VAT).

[Win]

I am looking to close my company - have thought about it and do not think outside roles will be of interest to me for some time now.
Have about 40 K in the company and with MVL cost of around 3k and all the things about lawyers etc around it , I am thinking the best option would be to bring the balance under 25 K by paying into a pension and then closing the company using the accountants and claiming ER.
The only issue is that paying a pension of 15K would result in a loss for this year - which when I ask the accountant - they are like you cna do it but not recommended .
Does anyone have any experience of this situation ? are you Ok to make a loss in terminal year or any year due to pensions ?

To add even if I carry the pension contribution to previous year it will make a loss for that year too. Last few years have not been kind.
I felt my accountant was more keen to push for a recommended MVL provider to get some kickback

[northernladuk]

Go umbrella if that is the case or open Ltd in wifes name ....

Another option is to convert the company into a property investment company or use the company funds to invest in equities

No tax to pay at this stage but PnL is taxed

And this is a perfect example why asking a bunch of your peers open ended generic questions with no detail isn't a good idea. Some idiot will invariably post a pile of utter crap like this.

[eek]

You’ve not mentioned how much you have in your company, so there’s little point in giving suggestions on what to do.

I’d be very wary of taking advice from the previous poster as he seems to live in a fantasy land of paying zero tax yet earning multi-million pound returns from his business empire that spans multiple Ltds in family and friends names. He may be a contractor or a permanent employee, or someone interested in the contracting market. He might never have been a contractor, but is just trying to see if anyone will listen to his tax evasion/avoidance/tactics advice. He may also be living in Switzerland, London or some tax haven somewhere.

Caveat Emptor.

He's also a PM, which confirms he lives in a fantasy world not based on any real reality

[WTFH]

My understanding is that if I went down the 'invest in equities' route, the company would be classed as a CIHC (closed investment holding co) - which means I wouldn't be eligible to BADR, which I guess isn't the end of the world? And also in 2023 when the new Corp Tax rules come into play, I'll pay 25% CT instead of somewhere between 19-25%.

If I became a CIHC; could I un-do this by then kickstarting trading again (in 1/2 years down the road) and continue contracting and then be classified as a trading company (providing I'm not investing/holding any assets at that time)?

You’ve not mentioned how much you have in your company, so there’s little point in giving suggestions on what to do.

I’d be very wary of taking advice from the previous poster as he seems to live in a fantasy land of paying zero tax yet earning multi-million pound returns from his business empire that spans multiple Ltds in family and friends names. He may be a contractor or a permanent employee, or someone interested in the contracting market. He might never have been a contractor, but is just trying to see if anyone will listen to his tax evasion/avoidance/tactics advice. He may also be living in Switzerland, London or some tax haven somewhere.

Caveat Emptor.

[chris424uk]

My understanding is that if I went down the 'invest in equities' route, the company would be classed as a CIHC (closed investment holding co) - which means I wouldn't be eligible to BADR, which I guess isn't the end of the world? And also in 2023 when the new Corp Tax rules come into play, I'll pay 25% CT instead of somewhere between 19-25%.

If I became a CIHC; could I un-do this by then kickstarting trading again (in 1/2 years down the road) and continue contracting and then be classified as a trading company (providing I'm not investing/holding any assets at that time)?

[NowPermOutsideUK]

But if he MVL's with a tax advantage he can't do that for 2 years... All in the details of the situation.

Go umbrella if that is the case or open Ltd in wifes name ....

Another option is to convert the company into a property investment company or use the company funds to invest in equities

No tax to pay at this stage but PnL is taxed

[SimonMac]

As NLUK says it depends, mainly on the amount of money in your company.

Under £25K and you can go down the strike off route, over £25k and you have to MVL

[northernladuk]

Close the company completely and start with a clean slate if/when you want to return to contracting.

You then are in a good position to choose the best way to go forward then.

But if he MVL's with a tax advantage he can't do that for 2 years... All in the details of the situation.

[cojak]

Close the company completely and start with a clean slate if/when you want to return to contracting.

You then are in a good position to choose the best way to go forward then.

[Whitelime]

Hello all. So I'm just looking ahead and considering what my options are for closing my company in the next few years. I plan on contracting for another 2/3 years and then effectively retiring, however I would like the option of returning to contracting if need be (i.e. financial crisis, stock market crash, world war 3, etc.) So I was trying to consider my options... which I believe are the following; make the company 'dormant' and just complete some basic account returns each year OR close the company (either by being struck off companies house or MVL). What's the pro's and con's of each for a contractor? I'm conscious that there's tax benefits from closing the company and receiving ER (or business asset disposal relief as it's now known) - which might also be of interest depending on how much surplus cash is in the account. But then I was also considering withdrawing money out of my business over the course of the first couple of years (low salary, dividends upto HRT).

Just looking for some wisdom from fellow contractors on this, rather than my accountant (I bug him enough with the present, nevermind 3 years down the line!). Thanks.

Don't assume BADR will be available in 3 years time.

If you can afford to salary sacrifice £40k a year into a pension (or more if you have unused allowances to carry forward), then working for an Umbrella Company is far from the end of the world if you need to return to contracting.

[northernladuk]

Each option will only be available in certain conditions and the pros and cons of each will depend on things like the amount of money, the reason you are closing it and a whole host of other factors we don't have. All that is left is to explain every option in detail, with massive assumptions to you so you understand all of them and that's just too much. You need to ask somethign more specific rather than every option under the sun.

Everyone's exit strategy will depend on their situation at time of exit.

You pay your accountant, bug him more. You'll know when you've bugged him enough as they'll be terminating their service which is highly unlikely

[chris424uk]

Hello all. So I'm just looking ahead and considering what my options are for closing my company in the next few years. I plan on contracting for another 2/3 years and then effectively retiring, however I would like the option of returning to contracting if need be (i.e. financial crisis, stock market crash, world war 3, etc.) So I was trying to consider my options... which I believe are the following; make the company 'dormant' and just complete some basic account returns each year OR close the company (either by being struck off companies house or MVL). What's the pro's and con's of each for a contractor? I'm conscious that there's tax benefits from closing the company and receiving ER (or business asset disposal relief as it's now known) - which might also be of interest depending on how much surplus cash is in the account. But then I was also considering withdrawing money out of my business over the course of the first couple of years (low salary, dividends upto HRT).

Just looking for some wisdom from fellow contractors on this, rather than my accountant (I bug him enough with the present, nevermind 3 years down the line!). Thanks.