Reply to: Closing Down LTD company - TAX EFFICIENT WAY

[secontrator]

[QUOTE=ASB;1164594]

You seem determined that your accountant is wrong (and that could be the case). Nobody can judge from the information you have divulged.

Or you seem to be determined to prove that iam wrong.

Also, you prejudged that my accountant is right. Part of the problem is the accountant most of the times which everyone can accept it.

I know my accountant is not my financial advisor he is my accountant/book keeper but, sometimes i have to rely on him even though i might have my done my research/advise very well.

Thanks

[ASB]

[QUOTE=secontrator;1164426]

Has it ever occurred to you to actually say to your accountant something like "I'm not sure how you have reached that number".

I have already asked this question to my accountant.

BTW, i don't have to reveal all the conversation that i have with my accountant. I will only reveal what is relevant to the forum.

Thanks

Ok, so maybe I put that it a slightly aggressive manner. Of course you don't have to reveal all the discussions your have had with your accountant.

I was simply trying to point out that the answer to "I've got 20k in the company how much CGT should I pay on dissolution" is £1800 (or potentially £1000 with entrepeneurs relief); but that is only accurate if that sum is the total of the shareholders funds. Your accountants answer is by all account £2800.

You seem determined that your accountant is wrong (and that could be the case). Nobody can judge from the information you have divulged.

[secontrator]

Has it ever occurred to you to actually say to your accountant something like "I'm not sure how you have reached that number".

You also talk about 20k + change "in the company account". What is in the company account bears no definite relationship to what is being distributed. The company assets extend beyond its cash in the bank. What about things you have bought in the pursuance of trade, the odd laptop, printer etc.

If the company has other non cash assets with a book value of around 5k then your accountants figures would be about right. It may be that the book value of the assets is materially different to their current actual value (just depends on what they are, when they were bought what the capital allowance regime use and what the depreciation policies were - this should be readily available from your annual accounts). If this is the case it may well be worth revaluing these which could lead to a CT rebate.


It seems to me you have no chance whatsoever of ascertaining what you may be missing without asking your accountant to explain - in terms you understand. The fact you have failed to understand them doesn't make them a liar (why such vitriol?) or stupid.

[QUOTE=ASB;1164286]Has it ever occurred to you to actually say to your accountant something like "I'm not sure how you have reached that number".

I have already asked this question to my accountant.

BTW, i don't have to reveal all the conversation that i have with my accountant. I will only reveal what is relevant to the forum.

Thanks

[ASB]

Finally, my accountant agreed to close down LTD company (btw, even if he said NO i would still do it).

Now, this is my question after paying Corp Tax in FULL, not invoicing since Oct 2009, iam sure iam eligible and i can convince the tax inspectors that iam not trading anymore.

The left over money in business account is £20,270 and after declaring ESC 16 he is saying that i should pay £2850 which works around 14% (CGT).

Now, i have checked in another forum they are suggesting that this is high and what i don't understand is CGT currently stands @ 18% surely this is less.

Is my accountant lying or incorrect or am i missing anything here?

Could someone share their views?

Thanks

Has it ever occurred to you to actually say to your accountant something like "I'm not sure how you have reached that number".

You also talk about 20k + change "in the company account". What is in the company account bears no definite relationship to what is being distributed. The company assets extend beyond its cash in the bank. What about things you have bought in the pursuance of trade, the odd laptop, printer etc.

If the company has other non cash assets with a book value of around 5k then your accountants figures would be about right. It may be that the book value of the assets is materially different to their current actual value (just depends on what they are, when they were bought what the capital allowance regime use and what the depreciation policies were - this should be readily available from your annual accounts). If this is the case it may well be worth revaluing these which could lead to a CT rebate.

It seems to me you have no chance whatsoever of ascertaining what you may be missing without asking your accountant to explain - in terms you understand. The fact you have failed to understand them doesn't make them a liar (why such vitriol?) or stupid.

[Gonzo]

I should also add, that if you apply for entrepreneurs' relief on your personal tax return then the CGT is 10% not 18%. (It is not actually 10% tax, you multiply the gain by 5/9 and pay 18% tax on that but it works out the same).

I am not an accountant and not qualified to give you advice on all this. I would ask your accountant for an explanation if I were you.

[Gonzo]

Finally, my accountant agreed to close down LTD company (btw, even if he said NO i would still do it).

Now, this is my question after paying Corp Tax in FULL, not invoicing since Oct 2009, iam sure iam eligible and i can convince the tax inspectors that iam not trading anymore.

The left over money in business account is £20,270 and after declaring ESC 16 he is saying that i should pay £2850 which works around 14% (CGT).

Now, i have checked in another forum they are suggesting that this is high and what i don't understand is CGT currently stands @ 18% surely this is less.

Is my accountant lying or incorrect or am i missing anything here?

Could someone share their views?

Thanks

Have you remembered to include the annual CGT allowance in your calculations?

For individuals, during the 2010/2011 tax year the first £10,100 of capital gains will be tax free. Don't forget to include all your capital gains when working out what you have to pay tax on. The HMRC site is pretty good on this I think. HM Revenue & Customs: Capital Gains Tax

[Wanderer]

The left over money in business account is £20,270

Hmm, can you make yourself redundant any take the money that way (first 30k tax free) ?

[secontrator]

Are there any thoughts or consensus on how much ESC C16 is regarded as "sticking your head above the parapet" for the fantastic grey areas we all have to deal with such as IR35?

Finally, my accountant agreed to close down LTD company (btw, even if he said NO i would still do it).

Now, this is my question after paying Corp Tax in FULL, not invoicing since Oct 2009, iam sure iam eligible and i can convince the tax inspectors that iam not trading anymore.

The left over money in business account is £20,270 and after declaring ESC 16 he is saying that i should pay £2850 which works around 14% (CGT).

Now, i have checked in another forum they are suggesting that this is high and what i don't understand is CGT currently stands @ 18% surely this is less.

Is my accountant lying or incorrect or am i missing anything here?

Could someone share their views?

Thanks

[Mr_Z]

Are there any thoughts or consensus on how much ESC C16 is regarded as "sticking your head above the parapet" for the fantastic grey areas we all have to deal with such as IR35?

[Stag Cozier]

I agree with all that, but for a client asking me today about closing down their limited company, I'd be warning them about the "potential" of 40% tax. The reason being that we'll never get the ESC16 application submitted to HMRC and agreed by them before the June emergency budget, so by default, we'd be working to whatever changes (if any) were introduced immediately on Budget day. Personally, I don't think anything nasty will be invoked with immediate effect but you just never know which is why I'd be warning the client of the potential changes, however unlikely.

You could mention the "potential" 40% CGT but then if Con/Dem do make it law and apply it retrospectively to the beginning of this tax year I'd rethink my options and possibly pay the £20k out as a divi. However, applying what is currently the law, CGT is 18% so act on that. If it changes to 40% and applied retrospectively, pay it out as a divi and pay 25% tax (assuming not an additional rate tax payer).

Applying for ESC C16 can take as little as a week which is before the budget date but why does that matter? It's just a concession to say you can distribute remaining profit as capital, in short.

Finally, why don't you warn your client that CGT might be "potentially" 99% in the future. You never know!

[philip@wellwoodhoyle]

Don't know where your accountant is getting 40% unless he is thinking ahead to the future when the Con/Dem regime kicks into full throttle. But for now, CGT is only 18% and that's after entrepreneur's relief and AEA (do a search).

I agree with all that, but for a client asking me today about closing down their limited company, I'd be warning them about the "potential" of 40% tax. The reason being that we'll never get the ESC16 application submitted to HMRC and agreed by them before the June emergency budget, so by default, we'd be working to whatever changes (if any) were introduced immediately on Budget day. Personally, I don't think anything nasty will be invoked with immediate effect but you just never know which is why I'd be warning the client of the potential changes, however unlikely.

[ASB]

Thanks guys. This is what i thought after doing my research.

Iam starting my work next week now one more question.

Am i forced to close down my LTD company before next week? ( before i start my new job)?
If the answer is NO, then iam assuming that i can take the money out from my company account after paying off all my liabilities.

Thanks

There is no reason why you must close down the company - now or whenever - unless you have agreed to do this as part of your contract of employment (this wouldn't be unusual). In any event in the latter case resigning from the board etc may be enough to satisfy any restrictions you have agreed with your new employer.

You can, of course, just take the money out. However how are you going to treat this? It will either be a loan, salary or dividends. In your circumstance none of these are likely to be the most tax efficient way.

If you wish to take it out as a capital distribution - so it comes under the CT regime - then there are only really 2 ways to do this.

- After formal liquidation (not a route you are likely to want)
- After you have been granted permission to do it by HMRC. The system here may have changed slightly with the changes in CGT however it used to be the case that you would write to HMRC applying for ESC16 and they would then grant the concession. You could then make capital payments as and when during the process.

[popint123]

Thanks guys. This is what i thought after doing my research.

Iam starting my work next week now one more question.

Am i forced to close down my LTD company before next week? ( before i start my new job)?
If the answer is NO, then iam assuming that i can take the money out from my company account after paying off all my liabilities.

Thanks

[Stag Cozier]

Assuming you have traded for at least 12 months and you're the only shareholder in your company, you can apply for ESC C16 from HMRC, distribute the £20k as capital and pay about £200 personal tax on it. Don't know where your accountant is getting 40% unless he is thinking ahead to the future when the Con/Dem regime kicks into full throttle. But for now, CGT is only 18% and that's after entrepreneur's relief and AEA (do a search).

You're old accountant doesn't need to be an IFA to tell you all this!

[Kess]

Do a search for ESC C16. Assuming HMRC agrees to it, it allows you to take the money out of the company as capital (so all you're subject to is capital gains tax).

Your accountant really ought to know about it...