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is it legitimate to close ltd & use umbrella

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    is it legitimate to close ltd & use umbrella

    Is it legitimate to close ltd & use umbrella so that to cash out the lump sum on ltd company bank account?

    Actually my situation is more complicated that. I got converted to perm at same company recently, and have a pending contract offer which seems to take forever to get finalised. My understanding is that if I close my ltd now and cash out lump sum as entrepreneur relief, and if that pending contract offer gets official, it's a fraud in HMRC point of view if I open another ltd in a very short period of time after closing previous ltd. I also prefer to cash out the lump sum if possible. That's why I'm asking if it's legitimate to use a umbrella company after closing ltd.

    #2
    It's legitimate to close a Ltd Co and then use an umbrella but AIUI it is not legitimate to claim entrepreneur's relief if you immediately continue in the same type of business. ISTR there is a required 2 year gap or something but maybe someone else here can provide chapter and verse or else a link to the relevant legislation ?

    Boo

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      #3
      actually my accountant @ SJD said it's legitimate.

      Originally posted by Boo View Post
      It's legitimate to close a Ltd Co and then use an umbrella but AIUI it is not legitimate to claim entrepreneur's relief if you immediately continue in the same type of business. ISTR there is a required 2 year gap or something but maybe someone else here can provide chapter and verse or else a link to the relevant legislation ?

      Boo

      Comment


        #4
        Originally posted by dkldn View Post
        actually my accountant @ SJD said it's legitimate.
        Go for it then, it's your arsehole receiving the inevitable red-hot poker....

        Comment


          #5
          Originally posted by dkldn View Post
          actually my accountant @ SJD said it's legitimate.
          What could possibly go wrong?

          This, perhaps?

          BTW, if you're looking for a definitive answer, you won't get one, except to your last point w/r to continuing the same trade via a new Ltd within 2 years, which would definitely prevent a capital distribution. In terms of working through an umbrella or going permie, no one really knows yet, but it's reasonably likely that these scenarios are caught too. Also, note that this applies to capital distributions in general, not just capital distributions for which you have claimed ER on your SATR, so any wrongful claim will lead to taxation as though the money were originally distributed as dividends (perhaps with some penalties too, depending on what you've done).

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            #6
            To be fair, Maslins had the same interpretation as the SJD guy, that going from Ltd to brolly does not preclude ER under the new rules.

            Cue the responses that Maslins has a bias here, and he does, but he doesn't usually post biased comments. And the wording certainly leaves room for his interpretation.

            As JB says, you aren't likely to get a clear answer. Read the legislation and all the guidance yourself, then talk to an expert. A contractor accountant is not an expert in this area, and neither is Maslins, IIRC. He provides the service but not tax advice. If there's a lot of money involved, pay for a specialist and get it right.

            Comment


              #7
              I don't see the point of you going through a liquidation and claiming ER now, only to then use an umbrella and pay income tax (up to 45%) plus NI on all of your earnings.

              If you know you're returning to contracting imminently, then continue to use your Ltd. Who knows, your new contract might only last 3 or 4 months and you can then reconsider options then.

              Just so that you're aware, liquidation takes several months to complete.

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                #8
                And nobody knows what tax inspectors will start doing in 2 years from now when they pick up on your self assessment return where the ER is finally claimed. Be prepared for a horrendous tax bill.

                Until there is precedent and established procedures I don't think anyone should be considering ER at this point if they are planning on switching to permie or umbrella for a similar role or industry.

                Comment


                  #9
                  I don't see the point of asking on here if you have had advice from a professional contracting accountancy company. Unless you'd rather believe Johnny Noquals and take his opinion over SJD's stance?
                  The greatest trick the devil ever pulled was convincing the world that he didn't exist

                  Comment


                    #10
                    Originally posted by LondonManc View Post
                    I don't see the point of asking on here if you have had advice from a professional contracting accountancy company. Unless you'd rather believe Johnny Noquals and take his opinion over SJD's stance?
                    This really isn't something for an accountant. Anyway, no one can provide a definitive answer at this stage.

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