Reply to: Advice on winding down contracting activities

[Jessica@WhiteFieldTax]

Yes, I was suggesting £120 a year - not £60 a month!

What has to be done in dormancy? It varies, but simple annual accounts, any tax stuff that comes through despite de-registration, and often queries about restarting and so on. At the end of day there is a basic cost in firing the servers up and running a business, so something has to be charged if people want an accountant to call on.

[ike2112]

One thing that's unclear is whether the £60+VAT is per month or per year. I'm guessing Jessica's assumed it's per year, in which case yes, that sounded very cheap. If it's per month, then potentially is a bit steep. However the work only really goes down once the company's fully dormant with VAT/PAYE deregistered and a whole year of inactivity has happened (so company accounts for full year can be £nil).

We've had a few clients who were disappointed that we couldn't slash our fee if they stop trading for a few months...that doesn't realistically make any difference to our workload.

It's per month.

And I have asked them to extend the company year to end of July now. So there will be no trading in the next year (which will now run August 2013 to July 2014). All that is left for me to do is pay my liabilities and get the rest of the cash out. Paying an accountant another £850+ this year and beyond seems ridiculous to me, but then I've proven I don't really understand these things!

[Maslins]

Can I ask what the work undertaken in dormancy would actually be?
There is no income, so no invoices. There are no employees any more, so no expenses. I would be de-registered from PAYE and VAT, so no more of that to do. The accountant does not provide insurance - I have a separate contract for that.
£60 plus VAT seems steep for submitting a couple of (mostly blank) forms once a year, which is what their task appears to be?

One thing that's unclear is whether the £60+VAT is per month or per year. I'm guessing Jessica's assumed it's per year, in which case yes, that sounded very cheap. If it's per month, then potentially is a bit steep. However the work only really goes down once the company's fully dormant with VAT/PAYE deregistered and a whole year of inactivity has happened (so company accounts for full year can be £nil).

We've had a few clients who were disappointed that we couldn't slash our fee if they stop trading for a few months...that doesn't realistically make any difference to our workload.

[ike2112]

Did you ask for options, or did you say something like "I'm thinking of making the company dormant - what would I need to do?" which sounds like how they interpreted it.

I wrote (and this is a copy & paste):- "my next contract ends in July and I expect this will be my final one. I am likely to accept a permanent offer I have been made, starting mid-August. In that event, what happens with my company - what do I do next? Do I leave it as it is and continue to gradually take money from it? Or is there a tax-efficient way to extract the remaining balance, either in the next few months, or across this year and next?
Also can you please clarify what selection I use from the drop-down menu for invoices on the new portal?
Thanks"
I think it's clear from the above, that I know very little and was looking for advice.

They just replied with a cost for dormancy services.
They didn't even actually explain what that involved or would result in - I found that out for myself on Companies House.
A further day later a different person answered the question about their new online portal. And then the next day, another member of staff answered that question again but with a different answer...

That in fact is really illustrative of my frustrations with them. I ask open questions, sometimes more than one at a time. They give one-sentence answers, often to only one of the questions.
To be honest it is rare that any of these responses are from my actual accountant - they are from 'the team' who seem to be essentially admin staff. There is no way to contact my accountant directly unless they are passed the email, which has happened twice in 2 years. Even when calling to speak with my accountant, I must make an appointment for a callback, which I thought was fair enough as accountants must be busy people. Yet I have found out recently that colleagues get a far better and more personal service than I do, whilst also paying around the same, or even less.

Can I ask why everyone's assumption is that I have done something wrong rather than my accountant?

You need to pay your bills before you can shut down a company. You can't just walk off with the VAT and tax money.

I know that. What I was pointing out was that when I stated the balance in company account above, I was not including the VAT and CT parts because I know exactly as you have said, that I need to pay those. So the 'balance' I gave, was not a true balance as it is the amount which would still be left AFTER I've paid VAT and tax.
Maslins mentioned a £25k threshold for a strike-off. My current balance is actually over £35k as I have the VAT and tax still in the account as I haven't paid the last amounts yet. I didn't know if that made it far too high.
I don't know exactly what my liabilities are as my year literally just ended, but I know roughly, so I already have the rough amounts plus a grand or two set aside. But Maslins has explained - I can pay VAT and tax, then a few grand into a pension, and get under £25k.

[ike2112]

Thats not a bad price for looking after a dormant company with the implied liability risks and admin overhead that the accountant takes on.

They really ought to have a FAQ sheet to give you on this type of thing that would at least answer the basic questions on this topic; the questions tend to be the same from each client, and its a set of circumstances that are uncommon for the contractor but common for the accountant. If they haven't got one, or don't offer it, then it rings an alarm bell I'm afraid.

Can I ask what the work undertaken in dormancy would actually be?
There is no income, so no invoices. There are no employees any more, so no expenses. I would be de-registered from PAYE and VAT, so no more of that to do. The accountant does not provide insurance - I have a separate contract for that.
£60 plus VAT seems steep for submitting a couple of (mostly blank) forms once a year, which is what their task appears to be?

[northernladuk]

It's pathetic. I wish he would read this:

http://forums.contractoruk.com/busin...al-forums.html

Read it? Hell, they wrote it for me!!!!

Seriously though you two, grow a pair. Problem : My accountant doesn't answer his mails. Answer : Ring him them. How is that rude and unhelpful. It's the perfect answer.

[ITPRO2]

Northernladuk; why the rude and unhelpful reply?

It's pathetic. I wish he would read this:

http://forums.contractoruk.com/busin...al-forums.html

[Jessica@WhiteFieldTax]

I emailed them 2 months ago asking about potential next steps for the company if I stopped contracting. All they have said was it will cost £60 plus VAT to keep the company ticking over as dormant. They will continue to provide all forms and submissions.

Thats not a bad price for looking after a dormant company with the implied liability risks and admin overhead that the accountant takes on.

They really ought to have a FAQ sheet to give you on this type of thing that would at least answer the basic questions on this topic; the questions tend to be the same from each client, and its a set of circumstances that are uncommon for the contractor but common for the accountant. If they haven't got one, or don't offer it, then it rings an alarm bell I'm afraid.

[Maslins]

Dunno what the OP thinks but reading this thread I would be knocking Maslins door down for a price for his solid advice and help to sort this situation out. Paying for advice like this is cheap compared to messing it up or worrying about it being handled badly.

Appreciate the kind words...though IMHO changing accountants at this late stage would largely be a waste of time. OP will have likely paid his current accountant to finish everything...but that of course doesn't mean a new accountant would do it for free.

OP - extend your year end by 1 month to 31 July (so it covers all your trading). Get your accountant to do the accounts for 13 month period. This should be fairly standard that you've already paid them for (fact it's 13 rather than 12 months makes negligible difference to the work).

Once that's done, pay off any liabilities, collect in any debts and see what you've got left. If it's <£25k, clear out the company bank account and send a DS01 form with a cheque for £10. Then all you need to do is declare whatever final amount you paid out in the CGT part of your SA tax return in due course.

If it's >£25k, depends how much by. If it's quite a bit over, worth considering a liquidation. If it's only just over, might be worth putting a bit into a pension/finding another way of spending some of the retained profits to bring it under £25k.

[northernladuk]

Dunno what the OP thinks but reading this thread I would be knocking Maslins door down for a price for his solid advice and help to sort this situation out. Paying for advice like this is cheap compared to messing it up or worrying about it being handled badly.

Just add to the OP (and because I know Chris will bung me a cut) Maslins has a lot of dealings with MVL and company closure so if you want an expert you got one of the best in this thread.

[Maslins]

When I mentioned the company balance, that does not include the Corp Tax and VAT I have stored away that I will need to pay out at some point. Does that matter?
Is it the case then I could get the balance down to, say £24,800 via pension contributions for my wife and I and then have the company struck off? Liquidation seems a lot more hassle and about a grand or two more expensive?

It'll be the net asset value which is relevant with regards to the £25k cap. If you've got (say) £30k cash, £5k CT liability and £1k VAT liability, then your net assets would be £24k, so once you've settled the tax bills you'd have <£25k cash to pay out anyway.

Agree that (even the cheap end) a liquidation does appear expensive when you're around the £25k mark. Becomes a lot more viable as the net asset value increases, as the liquidation cost hardly changes whilst the typical tax saving increases dramatically.

[northernladuk]

But the problem is I really do not trust them.

I emailed them 2 months ago asking about potential next steps for the company if I stopped contracting. All they have said was it will cost £60 plus VAT to keep the company ticking over as dormant. They will continue to provide all forms and submissions.

That was it. That was their total extent of advice or options. I've done a little research myself and I can see there are far more options than that, but I just do not have the knowledge or understanding to determine which option is best for me.

Maybe they would have said more on the phone.

[northernladuk]

They should be expected to complete the work that they are paid to do, in accordance with the contract. Anything more is a bonus, anything less is an issue.


They should be expected to complete the work that they are paid to do, in accordance with the contract. Anything more is a bonus, anything less is an issue.

<bzzzzt> Repetition....

[northernladuk]

It's not rude and unhelpful. You don't call your accountant but have problems with email. It is a common and rather annoying theme in problems that posters put up about agents/accountants etc... If you are having a problem... call them. Period. Don't rely on mail, text etc. That is a poor way to have a professional relationship. Nothing rude or unhelpful about that advice and I stand by it. You are legally responsible for your company's finances. It is your responsibility to make sure it is correct and if picking the phone up makes the difference between you fulfilling this obligation and not then it's an easy answer. There is also the personal hassle it removes.

But.. all that said you have clarified the situation. In that case, if you can't trust your accountant get another one. Maslins says not but if they are this bad you have an obligation to do so. Try calling one of the helpful ones on here. Maslins, Clare (Intouch), Jessica (Whitefield who we haven't seen for a bit) etc who seem very personal and see if they will offer you a package just to get over this final stage if your relationship with your existing provider is so irreparable.

[TheFaQQer]

I emailed them 2 months ago asking about potential next steps for the company if I stopped contracting. All they have said was it will cost £60 plus VAT to keep the company ticking over as dormant. They will continue to provide all forms and submissions.

That was it. That was their total extent of advice or options. I've done a little research myself and I can see there are far more options than that, but I just do not have the knowledge or understanding to determine which option is best for me.

Did you ask for options, or did you say something like "I'm thinking of making the company dormant - what would I need to do?" which sounds like how they interpreted it.

To make a company dormant, you just stop trading. It's probably worth de-registering for VAT and PAYE but you don't have to do that, so they are correct in their answer. You still need to file certain documents, which is where their charge comes from.

Have you asked for other options? If I got a response that just told me about their fees for a dormant company, then my response would then be to ask about shutting it down completely and what happens to the money.

When I mentioned the company balance, that does not include the Corp Tax and VAT I have stored away that I will need to pay out at some point. Does that matter?

You need to pay your bills before you can shut down a company. You can't just walk off with the VAT and tax money.