Reply to: Closing your company

[TheCyclingProgrammer]

Regarding VAT, ideally you would deregister before selling the assets to yourself but it depends on their value. If the VAT on the total assets would be above £1k then you will still need to account for the VAT on deregistration but if it’s below £1k then I believe you can deregister for VAT and sell the assets without VAT.

[d000hg]

Just ask your accountant. If you have to ask these basic questions it's good you're getting out as you're clearly not cut out to be a contractor.

FTFY... Is NLUK OK?

[Chaytor]

Well, capital gains tax is a form of personal tax, and normally even with an MVL there would be some personal tax payable. But that tax liability is typically much lower than if you were to get the same amount as dividends. Capital gains aren't income, so a big gain won't be pushing you into higher income tax brackets if that's what you mean.

Yes, exactly that. Thanks

[Fred Bloggs]

and I think I'm right in saying that capital gains don't count towards your personal tax burden for the year?

Personal allowance is against income. CGT, as the name suggests is for capital and has it's own annual allowance.

[Maslins]

and I think I'm right in saying that capital gains don't count towards your personal tax burden for the year?

Well, capital gains tax is a form of personal tax, and normally even with an MVL there would be some personal tax payable. But that tax liability is typically much lower than if you were to get the same amount as dividends. Capital gains aren't income, so a big gain won't be pushing you into higher income tax brackets if that's what you mean.

[Chaytor]

You CAN start doing the same thing via a brand new company the very next day. Issue is you'll lose any tax benefits you hope to get by doing the MVL. Ie the liquidation distributions would be taxed on you as dividends, rather than capital gains.

General consensus is a brolly would be fine. Reason being legally there you're an employee, rather than running a business with similar trade/activity.

and I think I'm right in saying that capital gains don't count towards your personal tax burden for the year?

[Chaytor]

Correct but just a point. You can't open another company in the same area for 2 years. IT Consultancy is such a broad activity though so it will cover pretty much anything IT (we think). Would moving from coder to PM be considered same area? Some argue not but if you have the skills to consult in both areas you'll still be an IT consultant so probably caught. After the 2 years then fill your boots.

Yes a brolly is fine as you aren't just phoenixing to gain a tax advantage if you move from MVL'd LTD to umbrella.

But whatever you do, DO NOT go forward based on the advice from a bunch of contractors. Speak to an MVL specialist and your accountant to get the full picture. It will be a very costly mistake if you don't get it right and you'll be stuck for 2 years so some forward planning is key. We are already getting a steady flow of people who did a knee jerk MVL because they were going inside and they've finally realised inside isn't the end of their contracting career, it's just another gig with a different tax wrapper. They will be losing most, if not all of the tax advantage from the MVL now they are via brolly even on outside gigs for the next 2 years.

Well, yes if you're going to be inside for 2 years with a brolly I can see that but my own plans would be to throw money at my pension for the next 2-5 years until I pack it all in

[Maslins]

My understanding is that I can't open another ltd company operating in the same primary business area. Or can I? Would I be prevented from doing this by virtue of the fact that HMRC would declare my ER from the wind up of my ltd to be invalid and come looking for repayment plus penalties therefore making it unviable?

Also as I understand it, I would be able to continue operating inside IR35 through a brolly.

You CAN start doing the same thing via a brand new company the very next day. Issue is you'll lose any tax benefits you hope to get by doing the MVL. Ie the liquidation distributions would be taxed on you as dividends, rather than capital gains.

General consensus is a brolly would be fine. Reason being legally there you're an employee, rather than running a business with similar trade/activity.

[jamesbrown]

I've been looking into doing the same via MVL but the questions I can't get answers for regard my future options in IT.

My understanding is that I can't open another ltd company operating in the same primary business area. Or can I? Would I be prevented from doing this by virtue of the fact that HMRC would declare my ER from the wind up of my ltd to be invalid and come looking for repayment plus penalties therefore making it unviable?

Also as I understand it, I would be able to continue operating inside IR35 through a brolly.

Thanks.

The TAAR means that any dividend distribution or self-employed income you receive from the same or a similar trade or activity to an earlier company, from which you received a capital distribution less than two years prior, is liable to render the capital distribution invalid; that is, render it a dividend distribution, subject to dividend tax. The TAAR is separate from ER/BADR, which is merely a personal tax relief, but it does mean that the difference between the capital and dividend distribution is much larger, i.e., you would need to pay back more when caught by the TAAR.

[Lance]

I've been looking into doing the same via MVL but the questions I can't get answers for regard my future options in IT.

My understanding is that I can't open another ltd company operating in the same primary business area. Or can I? Would I be prevented from doing this by virtue of the fact that HMRC would declare my ER from the wind up of my ltd to be invalid and come looking for repayment plus penalties therefore making it unviable?

Also as I understand it, I would be able to continue operating inside IR35 through a brolly.

Thanks.

it's nothing to do with ER (now called BADR).

It's to do with the money being a capital distribution rather than dividends.

[northernladuk]

I've been looking into doing the same via MVL but the questions I can't get answers for regard my future options in IT.

My understanding is that I can't open another ltd company operating in the same primary business area. Or can I? Would I be prevented from doing this by virtue of the fact that HMRC would declare my ER from the wind up of my ltd to be invalid and come looking for repayment plus penalties therefore making it unviable?

Also as I understand it, I would be able to continue operating inside IR35 through a brolly.

Thanks.

Correct but just a point. You can't open another company in the same area for 2 years. IT Consultancy is such a broad activity though so it will cover pretty much anything IT (we think). Would moving from coder to PM be considered same area? Some argue not but if you have the skills to consult in both areas you'll still be an IT consultant so probably caught. After the 2 years then fill your boots.

Yes a brolly is fine as you aren't just phoenixing to gain a tax advantage if you move from MVL'd LTD to umbrella.

But whatever you do, DO NOT go forward based on the advice from a bunch of contractors. Speak to an MVL specialist and your accountant to get the full picture. It will be a very costly mistake if you don't get it right and you'll be stuck for 2 years so some forward planning is key. We are already getting a steady flow of people who did a knee jerk MVL because they were going inside and they've finally realised inside isn't the end of their contracting career, it's just another gig with a different tax wrapper. They will be losing most, if not all of the tax advantage from the MVL now they are via brolly even on outside gigs for the next 2 years.

[Chaytor]

I've been looking into doing the same via MVL but the questions I can't get answers for regard my future options in IT.

My understanding is that I can't open another ltd company operating in the same primary business area. Or can I? Would I be prevented from doing this by virtue of the fact that HMRC would declare my ER from the wind up of my ltd to be invalid and come looking for repayment plus penalties therefore making it unviable?

Also as I understand it, I would be able to continue operating inside IR35 through a brolly.

Thanks.

[genji7]

Thanks for a point that I certainly was missing, northernladuk!

[northernladuk]

Just distribute the extra 1k in to the next tax bracket? It's hardly a fortune.

[genji7]

Hi, I came across this page as I'm considering the same stuff. It's been great to read the posts related to similar topics and I'm hoping to receive some valuable advice, please.

After working remotely overseas for a year + a year career break, I just started a new inside gig overseas. As I don't know when I will engage with the UK client for the outside work, I've been considering whether to make it officially dormant (already on the reduced fee with accountancy but the company status is just 'non-trading', not 'dormant') or close it as it's been 3rd year of no trading.

Personally, I don't mind keeping it if the maintenance fee is minimal. But after consulting with an accountant, it seems like I need to prepare to change the status for the official dormancy since the company account has been active for the current year according to the accountant. i.e. need to wait for April 2023.

I wonder if this is the usual practice as I'm not so keen to deal with admin stuff + a monthly fee. My plan was to make it officially dormant with some funds left (ideally no funds as I won't be able to access it during dormancy but there will be even after declaring the max basic rate dividends this year) and do the yearly accounting by myself or hire specialist do this with one-off fee.


For closure, the accountant quoted £300 to handle the steps described here and they're checking if any difference due to non-residency status. I wonder if these steps can be done by myself except for the final company return which might be covered by the monthly fee. It would be great to know if anyone did it by themself as the steps seem straightforward from the previous posts.

The problem is that I only can make the company funds down to £26k after withdrawing the max dividends within the basic rate for the current tax year and I wonder if this situation would prevent me to go down the dissolving a company this year. Does it seem like I can distribute this to a pension? to make it under 25k but I haven't been contributed to pension from the company account so not very familiar with the process. Is this something I need to check with the accountant?


Any advice would be appreciated. Thank you.