Closing the company down after just 1 year?

[vhadiant]

Alan, you are my accountant

Anyway just want to know what my options are, not exactly sure if I'm going permiedom. Will definitely give NW a call if my situation change.

[Nixon Williams]

It would make sense to at least wait until you are certain that you will not be returning to contracting in the near future.

Provided you have traded for 12 months you would qualify for Entrepreneur's Relief (ER). You would need to apply for closure soon after you cease trading or you may risk your status as a trading company.

Another risk would be if the amount of cash you have is very large, as HMRC could take the view that you are not a trading company, but an investment vehicle!

If the funds are treated as capital (ESC16), then they would be taxed at 10% or 18% if ER was not available.

Remember that you cannot simply have a series of companies that you close every few years, one of the conditions of ESC16 is that you do not intend to start another business.

Whilst this may not be relevant to you, applying for capital distribution may not be the best way, as an example we have a client who will not have any income for 2 years, so they can withdraw dividends and not pay any extra tax, which is even better than tax at 10% or 18%!!

Talk to your accountant and be fully open with your circumstances so they can best advise.

Alan

*ESC16 is the application to HMRC to haver the funds on closure treated as capital rather than income, this is usually better from a tax point.

[pmeswani]

Say, if (and that's a big IF) I'm going permie after having my own Ltd Co. for just over 1 year. Is it worth to close it down or just leave it open in case the permiedom goes belly up and I'm back to contracting?

Of course this is in the financial sense. Can I get the Entrepreneur's Relief? Not exactly sure what's the best course of action here.

Can't answer the Entrepreneur's relief bit. However, you may want to speak to your accountant about what you should do with your Ltd company as they may charge you for doing your accounts for the year ahead. If I ever go back to permie land, I would keep my Ltd company open until the probation period is over, just in case things didn't work out. If I was successful in my probation, I would disolve the company and move on. What you decide to do, make sure that you don't suffer any major financial loss.

[vhadiant]

Say, if (and that's a big IF) I'm going permie after having my own Ltd Co. for just over 1 year. Is it worth to close it down or just leave it open in case the permiedom goes belly up and I'm back to contracting?

Of course this is in the financial sense. Can I get the Entrepreneur's Relief? Not exactly sure what's the best course of action here.