Closing down company / Capital Distribution

[questiontime]

One thing that has been mentioned to me today is the fact that Ltd. company closure is something that would only normally be done if you're never intending to work in that particular sector ever again or for 'a long time'.

You are taking permanent work. Therefore it is permanent. End of discussion. Nothing grey here. If you change your mind after a year, it is up to you.

For people who close the company to make use of the CGT and show that they never intend to do a business in IT, by going on a holiday, using an umbrella company etc, the intentions are questionable and it is a grey.

[Trev16v]

Right, I've just had a long chat with a lady at Brookson who phoned me regarding the company cessation process.

Her job was to go through the ins and outs of closing the company with me, and also to make sure I'm aware of the other option which is to keep the company open and pay Brookson £16 per month for their non-trading service (whatever it's called).

I'm going to have a tax advisor phone me later to talk about taking the remaining company cash out as capital distribution.

One thing that has been mentioned to me today is the fact that Ltd. company closure is something that would only normally be done if you're never intending to work in that particular sector ever again or for 'a long time'. I don't really know if there's any specific minimum time gap you have to have between closure and starting up a Limited company again in the same sector. It seems a bit of a grey area to me but I'm hoping to be advised on this more later.

Oh, and the £100ish fee that Brookson wanted to sting me for first wasn't for the cessation process. That £100 fee was for the CGT consultation, i.e. taking the final cash out as capital distribution. The actual fee for cessation is something like £420+VAT, as mentioned in that other Brookson thread.

Hopefully I'll learn more later, but I'm getting the impression at the moment that closing the company, grabbing my remaining cash under CGT (and thus having the first 10.1K tax free) and then starting up another Ltd. company in the same sector two years down the line (say) may not be so simple.

Trev

[Wanderer]

That advice is much appreciated. Aside from the actual process of closing down the company, I was also seeking opinions like this on whether it's the right thing for me to do in the first place.

Definately the right thing to do. You built a business, now it's closing down because you have moved on to permiedom. That's a more legitimate than average reason in my opinion.

[Trev16v]

That advice is much appreciated. Aside from the actual process of closing down the company, I was also seeking opinions like this on whether it's the right thing for me to do in the first place.

Just one thing I need to clarify: with the new company tax year starting early April, presumably the company should be closed very swiftly by the end of this month to avoid being 'captured' by the next tax year, so I don't have to file accounts for 2010/2011?

[MarillionFan]

Hi all,

Until recently I was contracting through my own Ltd. company, which was set up for me by Brookson. Brookson continue to do my accountancy for me.

I've just gone permie with the client I was contracting for (I know, I know - but they made me an offer too good to refuse). I see myself being in this permanent position for the foreseeable future; say for two years at least. I do not expect to be doing any contracting work over this period.

I've spent a lot on the house in the last few months and so the amount of money I have withdrawn as director's fees / dividends, minus my expenses, is not far off the £43,875 HRT threshold. I still have about 20K sat in that business account which I'd like to take out in the most tax efficient way. My permie salary goes into the HRT threshold now anyway, so I don't believe there's any benefit to waiting until next tax year to take that 20K out. Whether it's now or later, I'll be clobbered with HRT.

Brookson have said to me however that a good option might be to close the company down and take the cash as capital distribution. If I quality for it, then I could take the first 10K tax free and the remaining money would be subject to either 10% or 18% tax (I don't understand at this moment why it's 10% or 18% but I will no doubt find out). Brookson inform me that approval is required from HMRC before you can take money as capital distribution.

The reason for this post is simply because I'm wondering what other options there are that I should consider. Or are there any issues with closing the company down and taking capital distribution that I should be aware of?

Thanks,

Trev

I also converted a few years back but left the company open. I was doing my own book-keeping, VAT etc but because I was busy elsewhere fell behind and eventually landed up with a massive fine, shed loads of hassle and paperwork.

If you believe that you are done, I would recommend you close the LTD, taking the money out in whatever your accountant suggests is the best way, but also taking into consideration end of this financial year versus a salaried role going forward. Also consider the hassle factor and costs of paying Brooksons ongoing. If you're LTD company straddles two financial years, it means you will have to pay for your accountants to be done twice(if its not part of their deal that is).

Go hassle free IMO.

[northernladuk]

To be fair there isn't a lot of them and I am sure they have a lot of customers. Show me a business that hasn't cocked up badly in a few cases and people bay for their blood. It happens but sometimes there is no smoke without fire.

[Trev16v]

Apologies - usually I'm very good at using the search function first but I think I erm... okay, I'll go and stand in the corner and face the wall.

It has been most interesting seeing your comments relating to Brookson though, and thanks for the links to the relevant threads. I have just had an email from Brookson tonight informing me that the fee is £100, but this isn't a fee to leave Brookson, as such; rather, it's their fee to do the additional administration required to close the company. I'll look into it further and see what other charges there may be.

I have personally always been happy with my service from Brookson and I find them helpful over the phone, so it's rather depressing to read the horror stories.

[northernladuk]

Lucky youre closing company down..otherwise using Brookson's can be bad for your company and health

He speaketh no lie. A quick search (dam I am good) reveals some nightmares..

one for you particularly Trev. Someone else using them and shutting company down. Discussion around charges you will incur

Closure Charges

And nightmare one from someone else...

Brookson Nightmare

[diesel]

Hi all,

Until recently I was contracting through my own Ltd. company, which was set up for me by Brookson. Brookson continue to do my accountancy for me.

Trev

Lucky youre closing company down..otherwise using Brookson's can be bad for your company and health

[northernladuk]

Three options:
close and hopefully pay 10% if HMRC approve
invest in pension
leave and draw as dividend when you're old and frail

Olly thats not very clear.. I don't understand...

[northernladuk]

Ok I think I found it. Although I trawled through it I didn't read it so could be wrong...

but here you go...

Linky

Also do a search for the word Close in Title Only in the Accounts section. 36 posts all on roughly the same topic.

Enjoyyyyyyyyyyyyyyyyyyy

[Olly]

Three options:
close and hopefully pay 10% if HMRC approve
invest in pension
leave and draw as dividend when you're old and frail
or just plain leave, you'll be back to contracting sooner or later, they always come back!

If I go perm, I'd try to arrange a better rate for the annual returns, or do them myself

[northernladuk]

I have been good today so I get one moment of madness for free don't I??? Good...

<Sigh> Have you searched? There is a question about this still active on the first few pages I believe let alone the number times this has been asked before. I seem to remember one thread where someone one did a pretty good write up on this but I had a very quick look and can't remember where it was as there are so many.

Closing it down, taking the money and re-starting, although possible I think, is frowned upon for obvious reasons but yours seems exactly why this exists so don't see a problem.

Have a quick search for some keywords and see what comes up.

[Trev16v]

Hi all,

Until recently I was contracting through my own Ltd. company, which was set up for me by Brookson. Brookson continue to do my accountancy for me.

I've just gone permie with the client I was contracting for (I know, I know - but they made me an offer too good to refuse). I see myself being in this permanent position for the foreseeable future; say for two years at least. I do not expect to be doing any contracting work over this period.

I've spent a lot on the house in the last few months and so the amount of money I have withdrawn as director's fees / dividends, minus my expenses, is not far off the £43,875 HRT threshold. I still have about 20K sat in that business account which I'd like to take out in the most tax efficient way. My permie salary goes into the HRT threshold now anyway, so I don't believe there's any benefit to waiting until next tax year to take that 20K out. Whether it's now or later, I'll be clobbered with HRT.

Brookson have said to me however that a good option might be to close the company down and take the cash as capital distribution. If I quality for it, then I could take the first 10K tax free and the remaining money would be subject to either 10% or 18% tax (I don't understand at this moment why it's 10% or 18% but I will no doubt find out). Brookson inform me that approval is required from HMRC before you can take money as capital distribution.

The reason for this post is simply because I'm wondering what other options there are that I should consider. Or are there any issues with closing the company down and taking capital distribution that I should be aware of?

Thanks,

Trev