Reply to: 40 grand...closing company...

[IR35 Avoider]

I'm pretty sure the 30K tax-free redundancy option is not open to us - I can't remember the reason.

[Rangster]

1. If you leave in sept, you won't be tax resident in the uk...so no tax to pay. Also, no capital gains to pay if you don't return to live for 5 years.

2. Take holiday, arrive in australia in feb, so not tax resident there until after june.

Result, no tax to pay.

Go on..you know it makes sense.

Hmm....very interesting!! How did you come to the date on Sept? is there a specific date within the month?

Thanks,
Wayne

[max]

Sorry to barge in on this thread but it is related….

I am currently contracting but moving to Melbourne in Feb next year. So going on the responses to this thread I would be better off leaving all of my money in my company and then after the 4th April next year I could take it out and be much better off?

If I had £30k in the company too, how would the tax breakdown work?

Thanks. I’m not very good at these things. Luckily I’m not a Finance contractor!!

Thanks

1. If you leave in sept, you won't be tax resident in the uk...so no tax to pay. Also, no capital gains to pay if you don't return to live for 5 years.

2. Take holiday, arrive in australia in feb, so not tax resident there until after june.

Result, no tax to pay.

Go on..you know it makes sense.

[Rangster]

Further qn....

Sorry to barge in on this thread but it is related….

I am currently contracting but moving to Melbourne in Feb next year. So going on the responses to this thread I would be better off leaving all of my money in my company and then after the 4th April next year I could take it out and be much better off?

If I had £30k in the company too, how would the tax breakdown work?

Thanks. I’m not very good at these things. Luckily I’m not a Finance contractor!!

Thanks

[FarmerPalmer]

When I closed my last company years ago I think I made myself redundant, which entitled me to some tax free cash.
Can't remember any more though.

upto £30k tax free (I was made dedundant from a permie job last year)
and then dump the rest in a pension

[IR35 Avoider]

Wait till the sixth of April. Pay yourself a one-off salary bonus equal to the personal allowance. Pay yourself a dividend equal to 90% of the size of the basic rate band. Take the rest, if there is any, as a capital gain.

[max]

I'm thinking of doing much the same for much the same reasons. Does anyone have any idea how long it takes for the revenue to grant ESC C.16 and how likely (or not) they are to do it with a typical contractor Ltd?

A couple of months should do it.

99% likelihood you'll get it

Also do you simply have to get your application for taper relief in by its removal in April or does it depend on when ESC C.16 is granted?

No...you need to stop trading for 3 months and apply, and payout by april.


Next time you have £50k to waste...please let us know so we can suggest better places to waste it!

[The Master]

ESC C.16 - if granted by the revenue will allow you to take it as capital, combine with taper relief and there will be no tax at all to pay.

I'm thinking of doing much the same for much the same reasons. Does anyone have any idea how long it takes for the revenue to grant ESC C.16 and how likely (or not) they are to do it with a typical contractor Ltd? Also do you simply have to get your application for taper relief in by its removal in April or does it depend on when ESC C.16 is granted?

[KentPhilip]

When I closed my last company years ago I think I made myself redundant, which entitled me to some tax free cash.
Can't remember any more though.

[where did my id go?]

ESC C.16 - if granted by the revenue will allow you to take it as capital, combine with taper relief and there will be no tax at all to pay.

[Dow Jones]

You are right

It's not like dividends, it's CGT, so £ 4k is the lot. Alternatively, drawing a salary incurs 10% tax/nic.
Thanks for the correction Mr Robin.
Not sure about Vectra's suggestion - he might be right too!

[VectraMan]

I'd wait for the next financial year, when you'd have no other income and then get your hands on the £ 40k which is a nice tidy sum that won't let go over the 40% rate. So it's 10% = £ 4k plus another £ 10k tax/nic = £ 14k total, so £ 26k net in your pocket (assuming CGT stays at 10%)

Pay a £40K dividend on the 6th April, and £35K ish will be tax free with the rest at 22% = £38K ish.

That assumes you don't work next year.

[MrRobin]

I'd wait for the next financial year, when you'd have no other income and then get your hands on the £ 40k which is a nice tidy sum that won't let go over the 40% rate. So it's 10% = £ 4k plus another £ 10k tax/nic = £ 14k total, so £ 26k net in your pocket (assuming CGT stays at 10%)

Why would you pay another £10k tax/nic if you were taking it as capital gains?! If you took it as salary, then why would you pay the initial 10%?

[Dow Jones]

CGT = 10% - up to £ 1m

I'd wait for the next financial year, when you'd have no other income and then get your hands on the £ 40k which is a nice tidy sum that won't let go over the 40% rate. So it's 10% = £ 4k plus another £ 10k tax/nic = £ 14k total, so £ 26k net in your pocket (assuming CGT stays at 10%)

[ChimpMaster]

Assuming you've already hit the 40% tax rate this year and want to close down soon as possible - apply for Taper Relief. Your accountant will know more and will be able to initiate the process.