Reply to: End of contractors at any GOV.UK project after April 2017

[Maslins]

What he said. I spoke to my accountant a few months back regarding my long term exit plan (winding up my company in 6-7 years and taking ER) and he said that winding up a company was not just a question of 'end trading, goodnight' - there was the wrap up of accounts, applying to HMRC for a wrap up notification, statatory noitice to any creditors and debtors, calculating tax liabilities, the actual closure, closing bank/vat/hmrc accounts, taking directors off listing, money transfers and ER processing (I know in this case ER is not part of the fiddle). My accountant said he used two specialist firms, and the current price tag was around £1200 - £1500 depending on assets in the company and generally took 4-9 months.

Hmmm...I'm anticipating your final sentence the "specialist firms" would be liquidators, hence the extra closing cost is for a liquidation.

For an accountant closing a company (non liquidation, just strike off), there'll typically be normal statutory accounts with a trivial amount of extra work ensuring balance sheet is tidied up a bit. Yes there's VAT/employer de-registration, but again, they're modest tasks. If it's a Maslins client there's no extra "close down" charges, unless perhaps the client had only joined us a few months earlier. The strike off itself just involves a £10 cheque to Companies House.

I don't see closing/restarting companies to be a boon for accountants.

As others have said, the 2 year thing is only really to do with tax benefits of CGT upon closure. Way before ESC C16 was closed off and MVL Online existed, there would be many contractors who would close their company every few years. Not for any tax breaks on closure, but to draw a line in the sand for IR35 purposes, so realistically worst case scenario would be HMRC going back a couple of years. Sounds like this new "plan" has a similar idea. Not saying I'd recommend it (certainly not something we've suggested to clients), but if these companies aren't taking out huge sums upon closure I don't see why they need to worry about doing something completely different for two years.

[jamesbrown]

That only counts if you take entrepreneur's relief. I think the suggestion is to close company a and start your next contract as company B.

It was one of the early approaches to avoiding historic IR35 issues. I really don't know how sensible it is...

No, ER is something separate, claimed personally on your SATR. It simply applies a reduced rate of CGT to a qualifying capital distribution. The Transactions in Securities (TiS) legislation is designed to establish whether a capital distribution is valid in the first place (versus reclassified as a dividend distribution). It's the updated TiS legislation that has identified a 2yr timeframe for conducting the same or a similar trade or activity.

[jonnyboy]

Did he also tell you can't trade again for 2 years or whatever the new rule is as well?

Yep, its called Phoenixing.... as Eeek says, its only if you take cash out via ER.. then you can trade, but it has to be a completely unrelated company (cannot be in the same group of HMRC company types)... otherwise you have to wait (as you say) for a 2 year gap. But that would not effect me, once I hit 56, I am out of this IT lark, and out of this country, and off to sunnier pastures. That is, assuming my plans work out, and the hector does not introduce more taxes to take is what is mine, and make it his.

[eek]

Did he also tell you can't trade again for 2 years or whatever the new rule is as well?

That only counts if you take entrepreneur's relief. I think the suggestion is to close company a and start your next contract as company B.

It was one of the early approaches to avoiding historic IR35 issues. I really don't know how sensible it is...

[northernladuk]

Did he also tell you can't trade again for 2 years or whatever the new rule is as well?

[jonnyboy]

Hmm a plan that would net said accountancy firm £1-5,000 per contractor.

What he said. I spoke to my accountant a few months back regarding my long term exit plan (winding up my company in 6-7 years and taking ER) and he said that winding up a company was not just a question of 'end trading, goodnight' - there was the wrap up of accounts, applying to HMRC for a wrap up notification, statatory noitice to any creditors and debtors, calculating tax liabilities, the actual closure, closing bank/vat/hmrc accounts, taking directors off listing, money transfers and ER processing (I know in this case ER is not part of the fiddle). My accountant said he used two specialist firms, and the current price tag was around £1200 - £1500 depending on assets in the company and generally took 4-9 months.

[Maslins]

Hmm a plan that would net said accountancy firm £1-5,000 per contractor.

Unsure how you figure that? I don't think many accountancy firms make big bucks on the starting/ending of a contractor relationship. To be honest if there is "easy money" it's the contractors that carry on for years. They get the hang of what they need to do, what the accountant wants etc, but still pay the same as the newbies asking lots of questions and those leaving.

MVL Online is however excited at Andy's suggestion

[eek]

An accountancy firm I have been speaking to are advising contractors to shut down legacy PSC companies prior to April and start afresh with a new company post April for this very reason.

Hmm a plan that would net said accountancy firm £1-5,000 per contractor.

[northernladuk]

How so? As far as we know it's perfectly acceptable, unless you are claiming Entrepreneurs Relief, that is.

Exactly this. If this isn't communicated properly, bearing in mind the vast number of contractors that haven't a clue how to do stuff, it could end in a lot of tears.

I'll bet everything I have someone will cock it up.

[DotasScandal]

If the latter a lot of people could find themselves in a position where they are unable to contract under a LTD for a few years.

How so? As far as we know it's perfectly acceptable, unless you are claiming Entrepreneurs Relief, that is.

[westtester]

An accountancy firm I have been speaking to are advising contractors to shut down legacy PSC companies prior to April and start afresh with a new company post April for this very reason.

Isn't Hector automatically notified when a company is being shut down? Seems like the ideal way to invite further investigation.

[northernladuk]

An accountancy firm I have been speaking to are advising contractors to shut down legacy PSC companies prior to April and start afresh with a new company post April for this very reason.

You would assume they have a very good understanding of the new rules about this and are giving it as part of a well thought out and executed strategy and not just a knee jerk reaction thinking no further than the IR35 issue. If the latter a lot of people could find themselves in a position where they are unable to contract under a LTD for a few years.

An on the topic of knee jerk... I'd be highly suspicious of anyone giving such detailed actionable advice at this point bearing in mind we just don't yet and need to wait a little bit before jumping to conclusions.

[Andy Hallett]

No one concerned that HMRC will take the view, you did same role prior to April 2017, and now your inside IR35, so lets investigate why you thought you were outside before.

This is the elephant in the room concern for any contemplating staying in a public sector contract.

An accountancy firm I have been speaking to are advising contractors to shut down legacy PSC companies prior to April and start afresh with a new company post April for this very reason.

[LondonManc]

Or make sure the public sector role you are performing in April isn't the same one you've been doing for the past 18 months...

Kind of what the contract rewrites will be about. BA will be rebadged, etc. Dodgy isn't daft. Enough....

[eek]

But an interesting gambit for those moving from private to public.

If you're staying in a PS role, you'd need to change behaviour and so on - accept a works phone, take a phone call out of hours, etc and get yourself balls deep in IR35. That will only work if you weren't behaving as a disguised permie before though.

Or make sure the public sector role you are performing in April isn't the same one you've been doing for the past 18 months...