9 month break - To retain accountant & keep company open?

[yasockie]

One more thing to consider is company reputation.
Normally when you're contracting, you're marketing your own CV but in the long run, if you want to try and grow the business a bit, you might consider marketing your Ltd Co as a services/expertise provider - then it will matter whether your co has been in the market for 3 or 10 years and is easy enough to check - even when I google my own ltd co I get all the companies house details on the 2nd spot....

[lje]

Of the top of my head things which may need to be done in your 9 months:

• VAT return and payment
• Paying PAYE
• Accounts to be sent to companies house (9 months after year end)
• Corporation tax payment (9 months after year end)
• PAYE/NI annual return

[Joxer]

Let's say you were leaving next week:

Speak to your accountant and tell them that you won't be trading for a while so you will not be needing their services for the time being. However, there is some work for them to do and you would like them to quote you a fixed price for it. What you want to do is:

1. Take a salary of £7,000 (or whatever the amount is) for the PAYE year so you don't have to pay any PAYE or NI. Once you have the monthly amounts, set up the bill payments to automatically pay you for this tax year and the next one too.
2. Immediately declare and draw as much dividend as you can up to your higher rate tax for the income tax year to April.
3. Calculate the max dividend you can draw for the next tax year. (Don't tell your accountant, but just quietly do the meeting minutes and dividend voucher for this in advance then set up a payment to go out on the 6th April for the full dividend for the next income tax year)
4. Arrange for your accountant to do the quarterly nil returns for PAYE and VAT over the next 12 months (a few minutes work per quarter)
5. Get the accountant to figure out how much money is left in the company at the end of all this (eg make sure it's not insolvent)

Really, there isn't much work involved here. They should be happy to quote a fixed fee for this and advise you if there is any other paperwork you need to file during that time. As for year end accounts, changing your year end is simple and would be a good way to move the deadline for filing your accounts to a more convenient time.

Just don't blow all your money on holiday......

Some great tips there Wanderer, many thanks.

It feels like I could quite comfortably do steps 1-4 myself and as long as I keep good track of outgoings vs. the balance in my company account step 5 seems reasonable to do myself also.

On that basis I'm struggling to see any compelling reason to retain the accountant for this 9 month period - especially seeing as I return prior to 2011/2012 year end and can presumably find another accountant to produce my year end accounts (which will be quite simple given minimal trading activity).

Am I missing anything folks?

I've a meeting scheduled this week with my accountant to discuss this. Unless they come back with a relatively low fee for the above I'm leaning towards no longer retaining them.

[Fred Bloggs]

Let's say you were leaving next week:

Speak to your accountant and tell them that you won't be trading for a while so you will not be needing their services for the time being. However, there is some work for them to do and you would like them to quote you a fixed price for it. What you want to do is:

1. Take a salary of £7,000 (or whatever the amount is) for the PAYE year so you don't have to pay any PAYE or NI. Once you have the monthly amounts, set up the bill payments to automatically pay you for this tax year and the next one too.
2. Immediately declare and draw as much dividend as you can up to your higher rate tax for the income tax year to April.
3. Calculate the max dividend you can draw for the next tax year. (Don't tell your accountant, but just quietly do the meeting minutes and dividend voucher for this in advance then set up a payment to go out on the 6th April for the full dividend for the next income tax year)
4. Arrange for your accountant to do the quarterly nil returns for PAYE and VAT over the next 12 months (a few minutes work per quarter)
5. Get the accountant to figure out how much money is left in the company at the end of all this (eg make sure it's not insolvent)

Really, there isn't much work involved here. They should be happy to quote a fixed fee for this and advise you if there is any other paperwork you need to file during that time. As for year end accounts, changing your year end is simple and would be a good way to move the deadline for filing your accounts to a more convenient time.

Just don't blow all your money on holiday......

And if there's anything left over, consider making a contribution to a pension.

[Greg@CapitalCity]

Depends

The decision depends on numerous factors, but generally I would say it is better to close down your company if you won't be using it for 9 nine months, and if you are not 100% sure you will use it when you return to the UK. I am just looking at this from a tax angle - you might just want to keep the company because you like its name....

Pro's for closing the company now;
(1) You get to extract 60k tax efficiently. To use entrepreneurs relief you need to apply for ESC C16 treatment. There are whispers this is going to be pulled, though there is nothing concrete on this. So at the moment the tax rules work in your favour;
(2) You get to close the business and draw a line under it. So if the HMRC were to review your records and decide the whole lot was caught by IR35 you could face a big tax bill. If they did that next year with a newly started company, the amount of revenue at risk would be substantially lower;
(3) If you pull £30k this year out, and 30k next year, then for next year, you will already be close to the higher rate earnings threshold before you even start back contracting again. And if you decided to go perm and earn £50k a year, well most of those dividends you paid yourself in 2012/13 would be subject to higher rate tax;
(4) You may also save in accounting fees depending on how your accountant charges for your services;
(5) Its also really easy these days to get a new company set-up these days. The bank account is also usually very quick, its just the VAT registration that can take 2-3 weeks (which isn't a major drama either really);

Good luck.

[Wanderer]

Let's say you were leaving next week:

Speak to your accountant and tell them that you won't be trading for a while so you will not be needing their services for the time being. However, there is some work for them to do and you would like them to quote you a fixed price for it. What you want to do is:

1. Take a salary of £7,000 (or whatever the amount is) for the PAYE year so you don't have to pay any PAYE or NI. Once you have the monthly amounts, set up the bill payments to automatically pay you for this tax year and the next one too.
2. Immediately declare and draw as much dividend as you can up to your higher rate tax for the income tax year to April.
3. Calculate the max dividend you can draw for the next tax year. (Don't tell your accountant, but just quietly do the meeting minutes and dividend voucher for this in advance then set up a payment to go out on the 6th April for the full dividend for the next income tax year)
4. Arrange for your accountant to do the quarterly nil returns for PAYE and VAT over the next 12 months (a few minutes work per quarter)
5. Get the accountant to figure out how much money is left in the company at the end of all this (eg make sure it's not insolvent)

Really, there isn't much work involved here. They should be happy to quote a fixed fee for this and advise you if there is any other paperwork you need to file during that time. As for year end accounts, changing your year end is simple and would be a good way to move the deadline for filing your accounts to a more convenient time.

Just don't blow all your money on holiday......

[SneakySimon]

Accountancy Amount

May be worth checking with your accountants, but mine (SJD) when I am not working allow me to drop my usual fee down.

[Sockpuppet]

My year end is July 2012 (by which time I'd be back in the country and aiming to back actively trading).

I guess my key question is: If I leave the company open and want to dispense with my accountant what (if any) are the key things I need to either have in place or do prior to my return in May 2012 to keep me on the straight and narrow?

(bearing in mind I'll shortly be filing my 2011/12 year end accounts)

If your already into a tax year then I'd leave the company running as your accountant will probably charge you the same for the accounts if there are 3 months or if there are 12 as its the same amount of work either way.

I'd leave the company going. File VAT/PAYE returns every 3 months and that is about it.

[Craig@Clarity]

Thanks for the input folks.

Would I qualify? Which is the more important date (formation date vs first billable day)?

The important dates are the contract dates so if it is late July 2011 - August 2012, you'll be eligible under current rules.

[Joxer]

Thanks for the input folks.

As a quick comment which could affect your decision; if you haven't had 12 months worth of trade, entrepreneurs relief cannot be applied so you'd be looking at either 18% or 28% CGT if it pushes you into higher rate tax on anything over and above the annual exemption amount of £10,600 for capital gains.

Without entrepreneurs relief then it feels like anything other than keeping the company open would be foolhardy.

I opened by company in late July, had my first billable day at my client on the last day in August 2011 and plan on leaving prior to the last day in August 2012.

Would I qualify? Which is the more important date (formation date vs first billable day)?

Whichever route you take, try and get everything sorted before you set off on your travels. It's a real pain having either accountants or the tax man wanting more info when you aren't at home to deal with it.

I hear you loud and clear. And with no-one in the UK capable of doing running and racing on my behalf it's doubly true.

When is you tax year? You can apply to have the accounting period changed by (upto 6 months i think) so if YE is half way through the travels you can move it to the end and deal with the YE stuff after you get back.

My year end is July 2012 (by which time I'd be back in the country and aiming to back actively trading).

I guess my key question is: If I leave the company open and want to dispense with my accountant what (if any) are the key things I need to either have in place or do prior to my return in May 2012 to keep me on the straight and narrow?

(bearing in mind I'll shortly be filing my 2011/12 year end accounts)

[Fred Bloggs]

I think I would spend a few hours setting up payments from the Ltd Co bank account to my personal account for the salary/divis in advance and prepare all the divi vouchers too. Could be a problem post dating everything but if nothing goes wrong, who'd know? That just leaves you to set up payments for tax/ni/year end return etc while you're away, shouldn't be too onerous? Or pay the accountant to do it for you for the period you're away?

[Sockpuppet]

When is you tax year? You can apply to have the accounting period changed by (upto 6 months i think) so if YE is half way through the travels you can move it to the end and deal with the YE stuff after you get back.

[Sysman]

Whichever route you take, try and get everything sorted before you set off on your travels. It's a real pain having either accountants or the tax man wanting more info when you aren't at home to deal with it.

[Craig@Clarity]

As a quick comment which could affect your decision; if you haven't had 12 months worth of trade, entrepreneurs relief cannot be applied so you'd be looking at either 18% or 28% CGT if it pushes you into higher rate tax on anything over and above the annual exemption amount of £10,600 for capital gains.

[Joxer]

Afternoon All,

I plan on taking a 9 month break (Late August 2011 to late May 2012) to do some travelling and am weighing up my options with respect to my limited company. I expect to return to contracting once my travel stint finishes (...but clearly this is dependent on market conditions).

Once VAT, corporation tax etc are allowed for I expect to have approx £60k in my company account by the time late August 2011 rolls around.

The options I'm considering are as follows (If I've missed an obvious one please feel free to point me in the rigth direction)

(i) Keeping the company open & drawing salary / dividend (up to the "efficient" limit of approx £42,475 in both tax years 2011/2012 and 2012/2013)

Pros:
- No effort / pain in closing down the company (and potentially setting up a new one upon my return)
- Can use the 9 months where no billings are coming in the door to chip away at the warchest in an efficient manner

Cons:
- Potentially lots of admin to do while travelling (if let my account go) or "wasting" ~£1100 in accountancy fees if I retain my accountant

(ii) Shut the company down and apply for entrepreneurs relief

Pros:
- Can get the full warchest amount taking only a ~10% hit

Cons:
- My warchest is too small to benefit from this (relative to simply drawing dividend / salary while I'm travelling)

On balance option (i) looks the most appropriate option but I wanted to throw it out there in case I'm missing anything obvious?

Has anyone any experience / advice with how they tackled taking an extended (planned!) break from contracting with respect to retaining / disposing of accountants etc? Can I simply dispose of my accountant in Aug 2011 and employ a new one in May 2012 (in preparation for my Ltd Co's year end in July 2012)

Thanks,
Joxer