Reply to: 10% CGT qualification

[hgllgh]

Be efficient with the facts. You wish to wind up the company as it no longer intends to trade.

If you "might" want to come back "some time" and maybe contract then it's not exactly set in stone.

You could always ask HMRC for their view.

I've sent an email to them so we'll see what they say.

I have trawled the internet as well as hmrc site and their seems to be NO info on this issue. I would have thought that this would be clearly stated otherwise the risk is that loads of contractors (er I mean entrepreneurs) will close their businesses, pay 10%, and start up again!

Surely HMRC realise this and could be using this as a form of entrapment for contractors who chance their arm.

Either way there must be some sort of time limit whereby if a contractor starts up again within this limit HMRC will come knocking. This must be in place now as HMRC will need some kind of system to prevent the abuse mentioned above.

[Ruprect]

Be efficient with the facts. You wish to wind up the company as it no longer intends to trade.

Exactly right. You can always change your mind. You were being honest at the time.

[Crossroads]

Here's a quick question following on from this discussion. In June this year, I'll be taking a break of at least 6 months from work. What is the accumulated wisdom in terms of leaving the company up and running or closing it down and starting a new one next year?

Probably less hassle to keep it open (bank account, VAT reg etc) unless you need to extract a large amount of capital from it.

[Crossroads]

yeh, you see your reasons are perfectly valid, but if I say i'm going traveling but might want to come back and contract again it sounds like a bit of a grey area! however i think its perfectly valid not to want to administer a dormant company when I'm half way around the globe! (i think you still have to submit 'null' returns etc?)

Be efficient with the facts. You wish to wind up the company as it no longer intends to trade.

If you "might" want to come back "some time" and maybe contract then it's not exactly set in stone.

You could always ask HMRC for their view.

[NickNick]

How long a break

Here's a quick question following on from this discussion. In June this year, I'll be taking a break of at least 6 months from work. What is the accumulated wisdom in terms of leaving the company up and running or closing it down and starting a new one next year?

[Hex]

or I might even go and be an electrician.

Interesting. I have been thinking the same!

[hgllgh]

yeh, you see your reasons are perfectly valid, but if I say i'm going traveling but might want to come back and contract again it sounds like a bit of a grey area! however i think its perfectly valid not to want to administer a dormant company when I'm half way around the globe! (i think you still have to submit 'null' returns etc?)

[Crossroads]

I didn't give any specific reasons, other than the business (and it's directors) were no longer going to trade.

Had HMRC enquired further, I would have explained:
1. The current share structure no longer fitted with business strategy and two of the three directors wanted out and the remaining director (me) cannot afford to buy them out, therefore solution is to wind up the company.

2. The only current fee-earning employee / director / shareholder (again, me) does not intend to continue in the same trade in the foreseeable future.

After this particular contract I plan to wind up the company and take a long break (like the rest of 2008). At the end of this I may go contracting again, or I may go permie, or I might even go and be an electrician.

[hgllgh]

thnx crossroads.

can i ask what reason you gave for closing down your company?

will you go perm for now or just not work!!?

[Crossroads]

Within the past few weeks, HMRC have confirmed that my impending company closure can make use of ESC C16, therefore I can distribute the funds in the company as capital.

It took them 3 - 4 months to respond to me.

This means it will be subject to CGT, not income tax. Sadly I haven't made more than £1m, so it will be at 10%.

I have no intention of opening another company in the short term, and if I do it will have a materially different share structure as well.

If I were to close one company and immediately open another, I would expect HMRC to hand me a large bill should I be investigated.

[hgllgh]

not according to the second link;



But I also think that to qualify you must be closing your business without the intention to open another one.

In which case, hgllgh should not tell them he plans on coming back...

well, i believe that rule is in place to prevent someone closing down their company, paying 10% tax, then starting up again straight away thus avoiding higher rate income/dividend tax. but if you are travelling for an indefinite period of time then i think that would be ok?

has anyone actually got recent experience with this issue?

[Dow Jones]

So obvious

Whatever the waiting time is, they won't take kindly to anyone closing a company for no apparent reason, then to open another one more or less straight away. I know of contractors that got permie jobs, waited for a couple of years then got the 10% taper relief that was then available. Alternatively, go with a brolly for some time, then start again. Just don't make it so glaringly obvious, as you suggest, if you don't want to draw attention.

[Moscow Mule]

I *think* that the new rules mean that you can only claim the Entrepreneurs relief once a lifetime...

not according to the second link;

5. An individual will be able to make claims for relief on more than one occasion, up to a lifetime total of £1 million of gains qualifying for relief.

But I also think that to qualify you must be closing your business without the intention to open another one.

In which case, hgllgh should not tell them he plans on coming back...

[hgllgh]

If it were that easy! There was previously a qualifying period of 2 years to be able to do this, not sure what the recent changes have done to it.

from the FAQ link above it looks like the qualifying period is one year ...

"There are no rules about the working hours of officers and employees. The condition is only that the individual is an officer or employee of the company throughout the one year qualifying period. However in order to qualify for relief all the qualifying conditions have to be met"

why can't HMRC just provide a simplified list of the main conditions

[hgllgh]

Cheers MM.

It looks like I would qualify in terms of closing down the whole of by business and there are no assets to deal with, just revenue generated from clients.

The FAQ is a bit odd, it gives a load of obscure examples and at the end of each says "to qualify for relief all the qualifying conditions have to be met" but doesn't say what the qualifying conditions are?

All I really want to know is that will HMRC accept going traveling for an indefinite period as a vaild reason for closing down my company and paying just 10% tax on the proceeds in my business account? And then if so, will they come after me if I come back and start contracting through another ltd co?