Can I liquidate my company with an MVL without repaying the director's loan? Can I liquidate my company with an MVL without repaying the director's loan? - Page 2
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  1. #11

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    Quote Originally Posted by Neo View Post
    £65,000 retained profit per my first post.
    Im not the only confused, post from Maslins...

    "2) Your company cash balance is only ~£3k. Take out the liquidator's fee and there's only a very small buffer there in case HMRC/other creditors make a claim"

  2. #12

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    Quote Originally Posted by stek View Post
    Im not the only confused, post from Maslins...

    "2) Your company cash balance is only ~£3k. Take out the liquidator's fee and there's only a very small buffer there in case HMRC/other creditors make a claim"
    Maslins understood clearly. You didn't. And please see the 'PS' in my first post.

  3. #13

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    Quote Originally Posted by Neo View Post
    Re your other points, the accounting period end is 31 May, so S.455 won't apply, and I still have the option to extend the accounting period to 31 November if necessary. I'm the only shareholder.

    Your point about the CT600 and not being able to future-date repayments is indeed an annoyance. But, is there any way I can achieve what I'm trying to achieve based on the above, even with a part repayment?
    I wouldn't dismiss S.455 quite so quickly as you and JB3000 seem to have done. To do so, as I understand it you'd either need to:
    1) (get your accountant to) lie on your CT600, either denying existence of the loan, or confirming it had been cleared when it hadn't.
    2) not be able to clear all tax matters prior to appointment of a liquidator. Perhaps not that big a deal, but as JB3000 suggests, will likely mean you can't use any of the online/cheap providers, so costing you a couple of extra grand in liquidator fees.

    Closely related, see thread on accountingweb here.

    Just make sure you know what you're doing, as if you end up "losing" 25% of the company's net assets to S.455 that for techy reasons then cannot be reclaimed, you'll be kicking yourself.

    Director loans seem to come up so often on this forum, like this magical way to get cash without consequence. Sometimes in this type of situation, more commonly because someone doesn't want to take the dividend to put them into higher tax now, so pushing it into next year. It's not good IMHO.

  4. #14

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    Thanks, Maslins.

    I'm not dismissing S.455 without basis, but you mentioned that I "may argue that doing the capital distribution within 9 months of the period end that the loan was taken should negate any S.455 risk".

    But I also heeded your comment that "you typically can't future date repayments, meaning you can't then complete the CT600 prior to liquidation starting, which is a further annoyance", hence my reply on that point.

    Of course, I wouldn't want my accountant to lie, nor would they, so your option 2 is the better option short of repaying the loan. I've contacted a number of liquidators already and I've had two responses so far. SJD and Johnston Carmichael would both allow it. In fact the latter suggests it in their template e-mail response. SJD charges about £1000 +VAT more than MVL Online, but this is sustainable as it would probably cost me more than that to repay it.

    I take on board your comments re S.455 and I would of course be very careful to ensure I am adequately advised by my accountant before actively progressing with any course of action.

    But I don't agree that this is viewed as a 'magical' way to get cash without consequence. I believe it is a strategy to do so as long as there is diligence on the tax rules. Same as contract accounting in general (e.g., paying oneself dividends, which George Osborne has now caught up on with the elimination of dividend tax credits).

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    Glad you've found a solution you're happy with

  6. #16

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    Just for clarity - are you saying that you took a £62k loan, aren't going to repay it, but will get ER when you shut down the company based on the £65k in cash?

    And SJD say there would be no legal / financial issue with this approach?
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  7. #17

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    Quote Originally Posted by TheFaQQer View Post
    Just for clarity - are you saying that you took a £62k loan, aren't going to repay it, but will get ER when you shut down the company based on the £65k in cash?

    And SJD say there would be no legal / financial issue with this approach?
    I got my head bitten off for asking that. Apparently it's obvious.....

  8. #18

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    Quote Originally Posted by TheFaQQer View Post
    Just for clarity - are you saying that you took a £62k loan, aren't going to repay it, but will get ER when you shut down the company based on the £65k in cash?

    And SJD say there would be no legal / financial issue with this approach?
    Not quite. The director's loan can be set off against the company's reserves so it doesn’t need to be repaid back to the company.

    @stek - pls stop arguing.
    Last edited by Neo; 9th November 2015 at 12:09.

  9. #19

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    Quote Originally Posted by TheFaQQer View Post
    Just for clarity - are you saying that you took a £62k loan, aren't going to repay it, but will get ER when you shut down the company based on the £65k in cash?

    And SJD say there would be no legal / financial issue with this approach?
    Hi The Faqqer

    Yes I think this is exactly what he is saying and there shouldn't be a problem with it in my opinion. The fees involved with the liquidation will be higher than a standard cash liquidation though as it is more complex. The insurance bond is also normally payable on the asset total of the company rather than just the cash at bank.

    The liquidator would go into the full in's and out's of the scenario but basically there would be a distribution in specie of the overdrawn director's loan account as this is an asset of the company. The debt the director owes is passed over to the shareholder to collect personally and this settles off some of the distribution they are owed from the company (in this case the majority).

    This can often be a good planning area in final years of a company is managed correctly but it isn't without its pitfalls.

    Remember, in this example the distribution is going to be £65k and this is what will be taxed at 10% (ignoring the annual exemption) so Neo will have a tax bill of say £6,500 but will only receive £3,000 in cash from the company so he'll have to stump up the difference himself (simplified of course).

    Martin
    Contratax Ltd

  10. #20

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    Thanks for clarifying, ContrataxLtd.

    I should also add that I will also benefit from not having to pay the 10% CGT as I am non-resident and intend to be for at least the next five complete UK tax years. However, I'm still awaiting clarification on this from my accountant as, reading here, I'm not sure now if that only applies if I have been non-resident from the beginning of the current tax year when the capital distribution is done, as I have only been non-resident since July.
    Last edited by Neo; 9th November 2015 at 12:56.

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