Reply to: Anti phoenixing rules - new contract outiside IR35

[jamesbrown]

The Targeted Anti-Abuse Rule (TAAR) introduced in order to combat 'phoenixing' (the practice of closing one company and starting a new one immediately) only applies to distributions made on winding up (liquidation). It does not apply on striking off.

They liquidated via MVL. I think this is implicit in the OP. In any case, it was confirmed later.

[Chart Accountancy]

Hi,

I closed my ltd which I have used for like 10y and received the last distribution in June 2022. I closed it because i thought i would never need it again. I never thought I would get a role outside IR35.

Well, I managed to secure a role outside IR35, it will be a 100% remote job for a foreign bank.

I spoke to 2 accountants. The first one said I will be caught by the TARR rules. The second one said i will be fine, since the reason i closed my company was because it was not needed as no contract outside IR35 was expected. He said there is a small risk that HMRC will ask questions but he would help me draft a letter explaining the situation.

anyone went through this?

The Targeted Anti-Abuse Rule (TAAR) introduced in order to combat 'phoenixing' (the practice of closing one company and starting a new one immediately) only applies to distributions made on winding up (liquidation). It does not apply on striking off.

[cojak]

A general comment - yes, there will be some people who MVL'd, then a couple of months later were offered an outside IR35 contract, and might have regretted their decision.

...but there's also plenty who didn't MVL and left their company ticking over. Some of those:
- will have then gone 2+ years without an outside IR35 contract,
- or worse, are now caught up in the MSC debacle.
They may well be cursing themselves for not having done an MVL a couple of years back.

Even those who did MVL then a year later wanted to contract again, they have choices:
- If they made big tax savings with the MVL (ie huge war chest, annual earnings modest), then they umbrella for a while, still better off overall.
- If they made small tax savings with the MVL (ie small war chest, annual earnings high), then they can use a company again, accepting dividend hit on liquidation distributions. Net downside is the cost of the liquidation was wasted money.
Still perhaps also marginal benefits of restarting with a clean slate, eg from MSC/IR35 perspective, even where they lost most/all of the personal tax benefits.

None of us reliably know what the future holds...you've gotta make the best of the situations that arise!

And here, ladies and gents, is the answer to 80% of the posts on the board.

Post of the month right here...

[Maslins]

A general comment - yes, there will be some people who MVL'd, then a couple of months later were offered an outside IR35 contract, and might have regretted their decision.

...but there's also plenty who didn't MVL and left their company ticking over. Some of those:
- will have then gone 2+ years without an outside IR35 contract,
- or worse, are now caught up in the MSC debacle.
They may well be cursing themselves for not having done an MVL a couple of years back.

Even those who did MVL then a year later wanted to contract again, they have choices:
- If they made big tax savings with the MVL (ie huge war chest, annual earnings modest), then they umbrella for a while, still better off overall.
- If they made small tax savings with the MVL (ie small war chest, annual earnings high), then they can use a company again, accepting dividend hit on liquidation distributions. Net downside is the cost of the liquidation was wasted money.
Still perhaps also marginal benefits of restarting with a clean slate, eg from MSC/IR35 perspective, even where they lost most/all of the personal tax benefits.

None of us reliably know what the future holds...you've gotta make the best of the situations that arise!

[WTFH]

I think you missed the context, it was a rhetorical question. I already asked my accountant and she told me.
That's one of the reasons i closed my company, I was investing the money and making thousands a year by trading bonds and trusts. keeping the company open was too costly. Switching the assets to cash and making the company dormant was not an option either as cash depreciates. hence my logical decision to close the company.

Paying myself a dividend and then making a company dormant would defeat the purpose.

Anyway we are getting away from the initial subject, thanks all for your help. Special thanks to Maslin for his informed and non judgmental response.

What was your company's SIC code?
If your company was an investment company and it was still being successful, then closing it sounds silly.
If your company was, e.g. an IT consultancy, but your company was "investing the money and making thousands a year", then you should probably have changed your SIC code when you stopped doing IT work through it.

[passerby]

And yet again, zero effort to find stuff out and relying on asking everyone questions because you don't understand. This is exactly why you are in the predicament you are in.

Copy that exact quote in to Google and you get your answer. You might actually learn something extra which will save us from your next daft question.

I think you missed the context, it was a rhetorical question. I already asked my accountant and she told me.
That's one of the reasons i closed my company, I was investing the money and making thousands a year by trading bonds and trusts. keeping the company open was too costly. Switching the assets to cash and making the company dormant was not an option either as cash depreciates. hence my logical decision to close the company.

Paying myself a dividend and then making a company dormant would defeat the purpose.

Anyway we are getting away from the initial subject, thanks all for your help. Special thanks to Maslin for his informed and non judgmental response.

[northernladuk]

Do you think a dormant company can earn interest on cash and pay bank fees?

And yet again, zero effort to find stuff out and relying on asking everyone questions because you don't understand. This is exactly why you are in the predicament you are in.

Copy that exact quote in to Google and you get your answer. You might actually learn something extra which will save us from your next daft question.

[ensignia]

Can someone point me where I screwed up?

By being a mercenary permietractor.

But don't worry, you're in good company; 1000s of you suddenly appeared in April 2021. You'll just have to face the consequences and forget about being a contractor for a while.

[jamesbrown]

Can someone point me where I screwed up?

It's right there in the OP, isn't it? Like many others, you were shortsighted about what the changes to the IR35 rules meant or, rather, the consequences of liquidating.

Do you think a dormant company can earn interest on cash and pay bank fees?

No, neither.

Both are tax adviser

Well, I guess one of them isn't very good at tax advice.

As discussed (to death) above, you can open a new company in October 2023 at the earliest, else June 2024 if you don't want to pay the extra tax on the second distribution and/or risk closer scrutiny of what you've been doing.

[passerby]

Really struggling to understand all the messages. Can someone point me where I screwed up? I am the only shareholder and I got all the money. I am using an umbrella at the moment and making significant pension contributions and doing really well.

Advice regarding the dormant company was made by my accountant, did not make it up. I had to empty all my accounts. Do you think a dormant company can earn interest on cash and pay bank fees?

I have 2 accountants at the moment. one used to manage my ltd co and the other does my tax returns. Both are tax adviser and gave me conflicting advice regarding phoenixing rules hence why i asked in this forum

[northernladuk]

That's a costly mistake. A complete failure of fiduciary responsibilities.
OP's shareholders should really consider whether to let OP run another company for them again. Lest OP make another mistake.

Indeed. OP made a screw up so they should really have learned to start stepping up and not carry on asking someone else to fix their problems.

[Lance]

Unfortunately you may have been an innocent bystander that's got caught in the tide of this happening. As soon as the changes were announced we had a load of people coming to MVL. They were told a contracting career/business is more than the next contract and that things might change. We also joked about a tide of people coming back in 6 months asking this exact question, and we weren't wrong.

In general the people that shut up shop at the first inside gig were clueless about contracting it they were the very people that have (arguably) brought all this down on us. It just happened this change in circumstance brought them all running out from whatever rock they were living and in the glare of the forum. So many people had very little sympathy for them or their situation and were a little frustrated to say the least. Now we are where we said we would be that sympathy has all but dried up so when asking for help to get out a situation they shouldn't be in people get a bit an ear bashing for it.

So sorry if this isn't you but you can see where we are coming from.

Google is your friend here.

Overview from Gov pages
https://www.gov.uk/dormant-company

And a million more articles on the details out there.

And ask your accountant. It's not something you want to be getting wrong.

oops.




That's a costly mistake. A complete failure of fiduciary responsibilities.
OP's shareholders should really consider whether to let OP run another company for them again. Lest OP make another mistake.

[northernladuk]

Correct me if I am wrong, but to make it dormant i had to empty the bank accounts. My company was cash rich and I had director loans as well. I would have had to pay all the accumulated cash as dividend or salary before making it dormant.

Google is your friend here.

Overview from Gov pages
https://www.gov.uk/dormant-company

And a million more articles on the details out there.

And ask your accountant. It's not something you want to be getting wrong.

[jamesbrown]

Correct me if I am wrong, but to make it dormant i had to empty the bank accounts. My company was cash rich and I had director loans as well. I would have had to pay all the accumulated cash as dividend or salary before making it dormant.

A dormant company doesn't need to have zero assets, but it does need to be not trading and to have no other taxable income (e.g., interest).

[passerby]

£13 to Companies house isn't exactly a lot and my dormant company accounts take about an hour to do.

Correct me if I am wrong, but to make it dormant i had to empty the bank accounts. My company was cash rich and I had director loans as well. I would have had to pay all the accumulated cash as dividend or salary before making it dormant.