Originally posted by Scoooby
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Reply to: Typical warchest amount and MVL
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Previously on "Typical warchest amount and MVL"
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They should yes. It's your money not theirs so they shouldn't be mixing it. Same as solicitors etc.
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Spoke to my accountant about the interim options until such time that I definitely do decide to MVL.
They suggested continuing paying my usual salary to myself into the new company year (from April) probably makes sense as well as possibly taking £2k dividends (up to tax free allowance). That way if I was to find a new outside contract in a few months (still think it's very unlikely) then I could continue as normal for the time being.
Although I've decided not to go down the coronoviris Job Retention Support route as it doesn't feel morally the right thing to do given my circumstances and money built up in the company. Even though I have a health condition where I've been advised to stay home for the next 3 months, which obviously limits my ability to find a new contract.
If I don't find any further contract work in next few months then I could claim the corporation tax back on the salary paid in the current company year as it would have resulted in a loss.
I know it can cause a delay in processing a MVL if you have to wait for a CT refund, but I'm not sure if it is advisable if it might cause any other issues or additional scrutiny when processing the MVL?
Also am I right in thinking that you need to transfer the business money to the liquidators for a significant period of time (could be months) as part of the MVL process?
If so, what protection is there if the liquidators themselves end up in financial difficulty given the current state of the economy? Is the money ring fenced in some way to protect businesses engaging a liquidator?
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Originally posted by lecyclist View PostWhat is preventing you, assuming you plan to open another Ltd, opening a second Ltd. 6 months say before an MVL, and then doing the MVL on the first company? You already have a Ltd. open, but I imagine there is some clause to preventing you starting to trade in the second Ltd?
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Originally posted by lecyclist View PostWhat is preventing you, assuming you plan to open another Ltd, opening a second Ltd. 6 months say before an MVL, and then doing the MVL on the first company? You already have a Ltd. open, but I imagine there is some clause to preventing you starting to trade in the second Ltd?
Something like that anyway.
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Originally posted by northernladuk View PostI can't think for one minute the amount of money extracted by MVL will even bat HMRC's eyelid. The process will be used by people who just meet the criteria and companies that have millions in the bank. As long as it's done properly I am sure they don't care about the amounts.
Just think about why you are closing. The problem is you won't be able to open another one for two years. We've already had one guy that's shut it and it didn't work out with his brolly and he wants to open a LTD to go back outside... which he can't. I have a feeling we are going to have a raft of these in the short term with the U Turn and in general for the next 2 years.
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Given that I'm currently on the bench. I definitely think a MVL within the next 3-9 months is a likely option for me, assuming I can't find any decent outside IR35 role (very likely in the current market) in that time.
However I'm not sure what's the best course of action over the coming months in terms of paying myself a salary and potentially applying for furlough support from the Government.
Should I continue to pay myself the same salary (furlough support or not) until such time as I potentially do a MVL? Appreciate that this might mean I end up paying more tax later in the tax year if i find a new inside IR35 contract or 'normal' PAYE employment after a period of time.
Is it best to MVL only once I secure a new inside IR35 contract or 'normal' PAYE employment (assuming I can't find any outside contract)?
In this scenario, I'd probably want to then claim back the company losses from continuing to pay a salary via a CT refund from the previous year before doing MVL?
Is this kind of scenario likely to complicate my situation and draw unwanted attention from HMRC?
It's really difficult to weigh everything up and decide how best to proceed, especially with all the unknowns.
Anyone else in a similar situation and thinking along similar lines?
Thanks
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Originally posted by MrMarkyMark View PostHmmmm, seems a bit of a risk there, no?
I hope you have the money to cover those 2 years should HMRC come a knocking.
Agency returns make it very easy to pick these up as far as HMRC are concerned, although ultimately it may be an insufficient amount for them to bother with.
It also raises the question .... who are HMRC more likely to investigate next year? .... the switchers who still have their Company open, the switchers who closed their Company with an MVL (practically guaranteed win there in clawing back large tax amounts) or switchers who closed without an MVL (who may have paid more tax than those utilising MVL)?
Let's be honest .... its a horrible time for everybody...especially contractors. It's all well and good folks criticising the switchers and permie-contractors, but contractors will likely be happy in just having a job in the next 6-12 months. If switchers would have simply left a few weeks back they could quite easily find themselves out of a job of any kind for a very long period of time.
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Originally posted by mogga71 View PostAgree with this. I was going to use an MVL but had second thoughts as I can see there being a need for real outside ir35 contracts when the dust settles as we will be in the middle of a sh1tstorm. I do want to close the Company as don't want HMRC investigation. Current gig was 2 years outside and now inside so don't want to take chances ... even with protection. Luckily I have a few years of pension contributions I can utiiise. I plan to take a small dividend in new financial year in order for Company balance to be under £25K and then close it down without need for MVL.
I hope you have the money to cover those 2 years should HMRC come a knocking.
Agency returns make it very easy to pick these up as far as HMRC are concerned, although ultimately it may be an insufficient amount for them to bother with.
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Originally posted by northernladuk View PostI can't think for one minute the amount of money extracted by MVL will even bat HMRC's eyelid. The process will be used by people who just meet the criteria and companies that have millions in the bank. As long as it's done properly I am sure they don't care about the amounts.
Just think about why you are closing. The problem is you won't be able to open another one for two years. We've already had one guy that's shut it and it didn't work out with his brolly and he wants to open a LTD to go back outside... which he can't. I have a feeling we are going to have a raft of these in the short term with the U Turn and in general for the next 2 years.
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Originally posted by Scoooby View PostThanks for all your replies on this. It definitely helps to put the option into context.
Sent from my iPhone using Contractor UK Forum
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Thanks for all your replies on this. It definitely helps to put the option into context.
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In case it's of interest, I just checked out the net asset values of MVL Online appointments over the last few years:
14% = £25k-50k
32% = £50k-100k
42% = £100k-250k
10% = £250k-500k
2% = £500k-1m
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Originally posted by Scoooby View PostHello,
Just wondering what the typical warchest amount is for people who've been contracting for a while (say more than 10 years) , especially in relation to a potential MVL?
Thanks
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Originally posted by Scoooby View PostThanks for the replies.
Just wondering if there is such a thing as an acceptable amount of retained profit to extract via an MVL, with anything above this likely to attract the interest of HMRC?
It would be good to know if anyone has experienced any issues with this in the past or is thinking about this being an issue for them?
If so, what other options are there if you still plan to close the company down in the foreseeable future?
Just think about why you are closing. The problem is you won't be able to open another one for two years. We've already had one guy that's shut it and it didn't work out with his brolly and he wants to open a LTD to go back outside... which he can't. I have a feeling we are going to have a raft of these in the short term with the U Turn and in general for the next 2 years.Last edited by northernladuk; 30 March 2020, 15:27.
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