Contractor - Shutting down Ltd company and starting again!?
Discussion
Eric Mc said:
I am sure the gist of the soon to be out of date legislation will be re-incorporated in the new rules.
I have been advised (hopefully correctly!) by the HMRC via my accountant that the 10% "entrepreneurs relief" on the first £1m (lifetime) will apply to ESC C16 dissolutions post April 6th. I've just had ESC C16 granted but don't plan to cease trading until the middle of next year, so rather important to me!
Vesuvius 996 said:
How about just paying your tax, like the rest of us have to?
Yes, but why pay more tax than absolutely necessary? They just waste it on wars, scumbags and taxi fares for the speaker's wife!If it is within the rules - which dissolving a company surely is - then it is fair game.
You see, the govt puts VAT on fuel duty - tax on a tax - so i figure they owe us!
Eric Mc said:
Have you taken on board my comments?
How many times do you intend to wind up your companies very time you fancy a tax fee bonus?
Sorry been away for two days so not been online! I've replied to this already Eric - I plan to take out more per month in the next company. But thinking out loud - if this is legal then why not make it a habit How many times do you intend to wind up your companies very time you fancy a tax fee bonus?
It's not a question of "legal" or "illegal". It's a question of "allowable" or "not allowable".
I think you might get away with it the once but if you tried it on every few years you would be asking for trouble.
As I said in a previous post, why don't you defer the withdrawl of the £50,000 dividend until after 5 April 2008. That will shift the tax liability arising on the dividend from this tax year into tax year 2008/09. Once it goes in there, you can schedule your regular 2008/09 withdrawls from the company in such a way as to optimise your personal taxes for 2008/09.
Don't forget that the tax payable on a £50,000 dividend paid after 5 April 2008 isn't due and payable until 31 January 2010 (less any Self Assessment Payments on Accounts you are due to pay in January 2009 and July 2009.
I think you might get away with it the once but if you tried it on every few years you would be asking for trouble.
As I said in a previous post, why don't you defer the withdrawl of the £50,000 dividend until after 5 April 2008. That will shift the tax liability arising on the dividend from this tax year into tax year 2008/09. Once it goes in there, you can schedule your regular 2008/09 withdrawls from the company in such a way as to optimise your personal taxes for 2008/09.
Don't forget that the tax payable on a £50,000 dividend paid after 5 April 2008 isn't due and payable until 31 January 2010 (less any Self Assessment Payments on Accounts you are due to pay in January 2009 and July 2009.
Edited by Eric Mc on Wednesday 27th February 12:08
Eric Mc said:
It's not a question of "legal" or "illegal". It's a question of "allowable" or "not allowable".
I think you might get away with it the once but if you tried it on every few years you would be asking for trouble.
As I said in a previous post, why don't you defer the withdrawl of the £50,000 dividend until after 5 April 2008. That will shift the tax liability arising on the dividend from this tax year into tax year 2008/09. Once it goes in there, you can schedule your regular 2008/09 withdrawls from the company in such a way as to optimise your personal taxes for 2008/09.
Don't forget that the tax payable on a £50,000 dividend paid after 5 April 2008 isn't due and payable until 31 January 2010 (less any Self Assessment Payments on Accounts you are due to pay in January 2009 and July 2009.
Eric is right (as always I might add! I think you might get away with it the once but if you tried it on every few years you would be asking for trouble.
As I said in a previous post, why don't you defer the withdrawl of the £50,000 dividend until after 5 April 2008. That will shift the tax liability arising on the dividend from this tax year into tax year 2008/09. Once it goes in there, you can schedule your regular 2008/09 withdrawls from the company in such a way as to optimise your personal taxes for 2008/09.
Don't forget that the tax payable on a £50,000 dividend paid after 5 April 2008 isn't due and payable until 31 January 2010 (less any Self Assessment Payments on Accounts you are due to pay in January 2009 and July 2009.
Edited by Eric Mc on Wednesday 27th February 12:08
).Limited companies are there to be a legitimate vehicle for entrepreneurs to give employment and basically keep the economy going.
Of course, despite the negative stigma attached, the director of a limited company may make a mistake, may fall foul to bad debtors etc and the company may have to be liquidated. That doesn't necessarily mean he is a bad businessman and should be allowed to work an an entrepreneur again, thus the limited company vehicle.
I suppose technically what you are doing is probably legal to a point. As Eric says though, doing this more than once every few years is going to attract attention. There is also the drawback of costs to form a new company, confusing old clients, loss of brand, confusion of staff and new contracts etc so that needs to be taken into account.
The way that would be reduced would be if the company is literally a sole director, providing a service under the limited company vehicle. I would have thought though that a practice of say opening and closing companies once a year would be seen as 'hiding behind' the vehicle in order to avoid liability.
Eric Mc said:
I think it would need to be MUCH, MUCH higher - certainly higher than the £50,000 the OP was originally talking about.
The old phrase "might as well be hung for a sheep as a lamb" comes to mind.
Because it is such a risk? Or because the tax savings are just not worthwhile? In which case why? You'd get £9.2k personal cgt allowance then the rest is 10% isn't it.The old phrase "might as well be hung for a sheep as a lamb" comes to mind.
I may be winding up my co. in a few months for legitimate reasons but only have maybe £20k to take out. Wouldn't I be better off as i wouldn't need to pay as much NI contributions etc?
If he leaves the money in the company and continues to trade for a few years, then he might be able to wind the company up later on with a much larger lump sum that can be removed at CGT tax rates.
If he tries to wind up his companies for relatively small tax savings on a regular basis then the risk factor becomes much higher.
Your situtaion sounds far more straightforward and I wouldn't see any problems with it.
If he tries to wind up his companies for relatively small tax savings on a regular basis then the risk factor becomes much higher.
Your situtaion sounds far more straightforward and I wouldn't see any problems with it.
Eric Mc said:
If he leaves the money in the company and continues to trade for a few years, then he might be able to wind the company up later on with a much larger lump sum that can be removed at CGT tax rates.
If he tries to wind up his companies for relatively small tax savings on a regular basis then the risk factor becomes much higher.
Your situtaion sounds far more straightforward and I wouldn't see any problems with it.
I see, its just a case of 'regularly' dissolving similar companies will make you an obvious target then, makes sense really.If he tries to wind up his companies for relatively small tax savings on a regular basis then the risk factor becomes much higher.
Your situtaion sounds far more straightforward and I wouldn't see any problems with it.
Seany88 said:
I see, its just a case of 'regularly' dissolving similar companies will make you an obvious target then, makes sense really.
Exactly, as the concession that allows this (ESC C16) is / was intended for use as a "one-off" by company owners who are winding up & retiring, and not as a regular tax planning tool.I'm advised that HMRC are regularly now seeking assurances (in writing) that the owners of a business are not seeking to transfer or continue the trade with a different company with the same / similar owners.
One point to note is that if ESC C16 is granted the wording provided by HMRC still allows them to disallow the treatment of the distribution as capital (and reclassify as it as income) should a later investigation show that you have breached the terms of ESC C16 (such as started a new company).
If you are winding up a company and do not plan to use it / continue in the same trade, then it is worthwhile for smaller amounts, but if you are looking to continue in the same trade in the future then it's not really worth doing for anything less than 6 figures IMHO. Leave the money in the company (invested wisely), and extract it all at a later date.
UpTheIron said:
Seany88 said:
I see, its just a case of 'regularly' dissolving similar companies will make you an obvious target then, makes sense really.
Exactly, as the concession that allows this (ESC C16) is / was intended for use as a "one-off" by company owners who are winding up & retiring, and not as a regular tax planning tool.I'm advised that HMRC are regularly now seeking assurances (in writing) that the owners of a business are not seeking to transfer or continue the trade with a different company with the same / similar owners.
One point to note is that if ESC C16 is granted the wording provided by HMRC still allows them to disallow the treatment of the distribution as capital (and reclassify as it as income) should a later investigation show that you have breached the terms of ESC C16 (such as started a new company).
If you are winding up a company and do not plan to use it / continue in the same trade, then it is worthwhile for smaller amounts, but if you are looking to continue in the same trade in the future then it's not really worth doing for anything less than 6 figures IMHO. Leave the money in the company (invested wisely), and extract it all at a later date.
Eric Mc said:
Is he going to be doing generally the same type of work or is there going to be a fundamental difference in the nature of what he or his business does.
Yes his trade would be different in nature, as he would own a company that would use his previous company's service. So as long as the revenue know that then its ok I guess.Edited by Eric Mc on Thursday 28th February 13:58
Gassing Station | Business | Top of Page | What's New | My Stuff