Post MVL Options

[Maslins]

Lol, hold on, I'm not saying get a new client and you're magically in the clear. I'm saying if you're going to close down one company and start a new one, try to minimise any links between them.

Completely agree that without case law we don't have much to go on, but I'd suggest HMRC would look at a variety of facts to make their argument (similar to IR35 and other grey areas):

They'll likely be comparing the below features between Oldco and Newco, plus inevitably some others I haven't thought of:
- length of break between invoicing
- similarities in branding
- using the same assets
- having the same clients
- having the same suppliers
- type of work being done (tough to change this)
- who's doing the work (tough to change this too)

I don't know exactly what their take on the rules would be, but I'd suggest thinking about the above, and ensuring there's as little link as possible between the two companies. Making sure first client of Newco isn't the same as last client of Oldco is just one thing, but I think it's a relevant one to help show you're not picking up exactly where you left off.

[Craig at Nixon Williams]

My opinion on this differs to Maslins, and until there is some case law we will not have a definitive answer: I would suggest that a ‘trade’ doesn’t stop with one client and a new ‘trade’ begin with another client.

In my opinion, your trade lies with you and what you do, not with one particular client. The same trade could therefore be performed over a range of clients and at different times and through different entities. Your reputation is then an intangible asset associated with that trade (you).

Craig

[TheCyclingProgrammer]

With a contractor, realistically what trade and assets are there? "Trade" I would suggest would be previous clients, "assets" is typically a laptop and mobile.

As I mentioned before, surely goodwill and your reputation as a contractor is an asset (if the goodwill and reputation is associated with you personally rather than YourCo)?

[TheCyclingProgrammer]

The problem is that the courts may not see it in the same way because intent is very difficult to prove.

The guy that you refer to sounds like the type that the legislation is aimed for - but to be caught at it they could go for somebody that does it once.

As I said before, really can't say until we see a test of this in the courts!

Craig

Worth noting that according to HMRCs guidance, the burden of proof is on the tax payer, not HMRC!

[Maslins]

I think common sense (and your own conscience) will lead the way on this.

Also the example HMRC give for transactions in securities seems quite a lot more aggressive than an example where someone closes down, takes (say) 6 months out to go travelling, then sets up a new company to start again.

In their example company 2 is already created before company 1 starts the liquidation process. The trade and assets are transferred barring the cash.

With a contractor, realistically what trade and assets are there? "Trade" I would suggest would be previous clients, "assets" is typically a laptop and mobile.

I wouldn't want to put a finger on a certain time frame that makes it ok, but I'd suggest ensuring first client of Newco is different to last client of Oldco, and that you use it as an excuse to buy a new laptop/phone should see you safe. I'd also recommend against doing anything daft like calling NewCo "OldCo 2 Ltd" so they can't argue there's value in the name which has been kept.

...re the OP, my main issue is before closing down Oldco, he's already planning another gig, and I can't imagine there's a good commercial (non tax) reason for putting it through a different company to the existing one.

[Craig at Nixon Williams]

And conversely you could start MVL with the intention not to contract again and something could drop in your lap to change your mind the day after the process has completed. I think it is people doing this regularly are the ones that are in trouble IMO. There was a guy at my last gig that said he closed his company every three years to get his money out. Purely tax avoidance, no business justification whatsoever.

The problem is that the courts may not see it in the same way because intent is very difficult to prove.

The guy that you refer to sounds like the type that the legislation is aimed for - but to be caught at it they could go for somebody that does it once.

As I said before, really can't say until we see a test of this in the courts!

Craig

[northernladuk]

In my opinion, it is impossible to give a definite answer to something like this as it has not been tested through the courts. We don't even know if the courts would even look at the length of the break in trade.

For example: you could stop working tomorrow, go travelling for several years and resume the same trade on your return - if you left with the intention of starting up in business on your return, having benefited from CGT rates on the funds in the first business then the rules should apply.

Craig

And conversely you could start MVL with the intention not to contract again and something could drop in your lap to change your mind the day after the process has completed. I think it is people doing this regularly are the ones that are in trouble IMO. There was a guy at my last gig that said he closed his company every three years to get his money out. Purely tax avoidance, no business justification whatsoever.

[Craig at Nixon Williams]

Out of interest, how long should you be looking at in terms of a gap between starting up again?

In my opinion, it is impossible to give a definite answer to something like this as it has not been tested through the courts. We don't even know if the courts would even look at the length of the break in trade.

For example: you could stop working tomorrow, go travelling for several years and resume the same trade on your return - if you left with the intention of starting up in business on your return, having benefited from CGT rates on the funds in the first business then the rules should apply.

Craig

[northernladuk]

Out of interest, how long should you be looking at in terms of a gap between starting up again?

From my understanding, it seems like the main issue with the transactions in securities rules is the transfer of non cash assets from the old company to the new one. If goodwill and existing customers can be considered assets, the I suppose you, or at least your reputation, as the main fee earner for the company could arguably be considered its biggest asset? Especially if you trade on your own name (i.e. he reputation is attached to your name and not the company name).

Wouldn't this also fall under GAAR rules as you are creating a tax advantage if you were closing the company just to make use of the relief to get the money out cheaply and then restarting the business again shortly after.

I am sure a single even could be argued that you intended not to continue but as soon as the company was liquidated an opportunity came up meaning you had to start again very soon. I am sure it happens. It's just making a habit of it that will land you in hot water eventually.

[TheCyclingProgrammer]

I think brolly is your best bet for the short term gig...otherwise keeping the existing company open a little longer.

Starting a new company would be asking for trouble...whilst you might get away with it, I can't see any good (non tax) reason you could justify it with. It would seem to be a continuation of the trade, hence fall foul of the research you've already done.

Out of interest, how long should you be looking at in terms of a gap between starting up again?

From my understanding, it seems like the main issue with the transactions in securities rules is the transfer of non cash assets from the old company to the new one. If goodwill and existing customers can be considered assets, the I suppose you, or at least your reputation, as the main fee earner for the company could arguably be considered its biggest asset? Especially if you trade on your own name (i.e. he reputation is attached to your name and not the company name).

[Maslins]

I think brolly is your best bet for the short term gig...otherwise keeping the existing company open a little longer.

Starting a new company would be asking for trouble...whilst you might get away with it, I can't see any good (non tax) reason you could justify it with. It would seem to be a continuation of the trade, hence fall foul of the research you've already done.

[DirtyDog]

The obvious option is of course to use a straightforward umbrella. Other than the expected tax bill, is there any downside to this?

If you are only going to do the one gig through them, then you will need to consider what expenses you can claim carefully. Make sure you choose one which understands, rather than the old "oh, just claim £15 a day no matter what, we have a dispensation" crowd.

[malvolio]

Care to explain how a "brolly" can allow you to work as Self Employed? The two tax regimes are entirely separate and can't be combined...

[northernladuk]

I would say this is a good example of where Brolly's can help. They provide a short term simple way to do this type of work. Only you can decide if you can take the hit. There are a couple of calculators out there that can give you a comparison but going brolly isn't exactly going to leave you penniless. I think it's not a bad option.

I could suggest finding a friend you trust implicitly and putting it through his business but it's a lot of hassle for possibly not much saving.

If you do go brolly you can't claim certain expenses as this will be your one and only assignment with them. Mileage, food etc. I would question how much IT kit you are going to expense for one assignment as well. If you are thinking of stacking up on new laptops artificially before you go perm I would start worrying. How much are you talking?

Ring Lisa and have a chat with her and see what expenses the brolly will allow. For one gig I wouldn't go muddying the waters when you are looking at an MVL in the background but will be interesting to see if there are above board and more efficient ways of doing a single gig.

[Crossroads]

I know this has been covered to some extent in various threads, but having been offered an unexpected opportunity it has meant I've been doing some Googling and got a few other thoughts / options and would appreciate the resident experts views.

I'm planning on closing my Ltd Co via the MVL route at the end of my current set of contracts, all of which come to a close at the end of this year. I had planned to take a couple of months or more out, possibly followed by a stint in permie-land, but I've been offered a short term role that is well worth doing. I don't really want to delay the MVL as it would be a good time for me to get hold of some of the funds personally and clear a few debts, buy a new car, etc etc. I've not ruled out postponing the winding up but it's not a preferable option currently, so I need to accelerate my hunt for an alternative vehicle.

The obvious option is of course to use a straightforward umbrella. Other than the expected tax bill, is there any downside to this?

I'm not going to go for any kind of offshore management company for obvious reasons, but other options I'd appreciate comments on the use of a payroll company that would allow me to be self-employed (such as Gabem Solo or Futurelink - just two I've found from Google). They appear to operate in a similar way to the typical Brolly, but allow me to be self employed, which would presumably have the advantage of allowing me to expense genuine business expenses (such as IT kit)?

I can't come up with a method that allows me to continue to use a Ltd Company without flying in the face of the transactions in securities rules, but if anyone has any clever ideas I'd be keen to hear them.

I think I know the answer is a brolly, but worth asking I thought!