Tax Efficient Way to close Ltd

[craigy1874]

I checked this with the HMRC for somebody when they first introduced the TAAR, at that point they said it was fine to continue the same thing through a brolly. However, that was several years ago, they could have changed their mind since then and I don't have a call reference or notes about the clients circumstances, having changed job twice since then.

The best thing you can do is to explain your plans to your accountant (where there is a professional relationship, and not strangers from the internet), they might then put in a similar call for you.

Looking at you post history, it looks like you were considering doing something similar in 2013, and I gave some advice at that point - out of interest, is this the same company as you were talking about back then or another one?

To be fair though, in general terms, HMRC don't have a clue, so they are the last people I would be relying on to confirm the position.

[Craig@Clarity]

The wording is:
The individual receiving the distribution continues to carry on, or be involved with, the same trade or a trade similar to that of the wound-up company at any time within two years from the date of the distribution.

How can doing the same thing in a brolly not be considered to be involved in the same trade!!!

I would be grateful if anyone could provide a definitive answer on this, as the brolly route is something that I would consider ...but always assumed I would be caught by the above condition.

You would probably be caught by this condition as would New Modeller Army who said they would go brolly permanently, assuming the trade is similar or the same then condition C would apply. However, condition D would still need to be satisfied in order for the rules to apply. Assuming that closing down the company to go brolly permanently is not a decision made to obtain a tax advantage, along with being viewed as employee, you should be fine.

However, as others have mentioned there is no definitive answer at this point except for a few examples. CIOT did offer HMRC 18 examples for their guidance, none of which were adopted during consultation. Interestingly, in one of their examples, it mentions a recruitment consultant trained for 3 years, closed down her company, started a new one and began trading as an IT consultant. This is not considered similar or same trade to them and therefore the rules wouldn't apply.

[WordIsBond]

You would probably be caught by this condition as would New Modeller Army who said they would go brolly permanently, assuming the trade is similar or the same then condition C would apply. However, condition D would still need to be satisfied in order for the rules to apply. Assuming that closing down the company to go brolly permanently is not a decision made to obtain a tax advantage, along with being viewed as employee, you should be fine.

IMO this pretty much nailed it.

You might be argued to be in the same trade, but it is pretty easy to argue, if you've become an employee (brolly or permie) that you haven't closed the company to gain a tax advantage. You've closed the company because you don't need it any longer.

It's true that it hasn't tested yet, and it is unlikely to ever be tested, because HMRC is pretty unlikely to ever challenge someone in this situation.

[RajaStyle]

You can't apply to strike off the company until it has ceased trading for 3 months. There is absolutely no requirement to extend the accounting period by 3 months to do this.

Some accountants can come up with weird and wonderful things!

Thanks for the many replies for some reason I was no longer getting notifications about updates to this thread and decided to browse directly just in case. I just want to draw a line with this company and start again with a new accountant and create a new ltd to include my wife.

So it seems what my accountant wants to do is normal ....

accountant has said the process is I need 3 months of trading free before closure so they will extend my end of year by 3 months to end of Feb and it will be advertised in the standard just in case any creditors including HMRC want to make a claim. Anything remaining in account I will have to take as dividends, no other tax efficient method to extract.

Seems overkill, friend of mine said he just didn't file any 1st year accounts and he was struck off anyway .... is this legal or possible ? Or any other method ? Or my accountant knows what they are doing.

[northernladuk]

Thanks for the many replies for some reason I was no longer getting notifications about updates to this thread and decided to browse directly just in case. I just want to draw a line with this company and start again with a new accountant and create a new ltd to include my wife.

So it seems what my accountant wants to do is normal ....

accountant has said the process is I need 3 months of trading free before closure so they will extend my end of year by 3 months to end of Feb and it will be advertised in the standard just in case any creditors including HMRC want to make a claim. Anything remaining in account I will have to take as dividends, no other tax efficient method to extract.

Seems overkill, friend of mine said he just didn't file any 1st year accounts and he was struck off anyway .... is this legal or possible ? Or any other method ? Or my accountant knows what they are doing.

So who would you rather listen to. Your friend or the qualified professional you are paying?

[RajaStyle]

So who would you rather listen to. Your friend or the qualified professional you are paying?

Well he listened to his accountant, the professional he was paying ....

[WTFH]

Well he listened to his accountant, the professional he was paying ....

A few questions:
1. Did your friend close his company recently?
2. Has he had an accountant complete any of his personal tax returns since closing it down?
3. Was his company set up in the same way yours was?
4. Did he have roughly the same amount of money in his company when he closed it?

[webberg]

At risk of being deemed a doom sayer and hopefully avoiding being a Cassandra, please, please be careful.

HMRC has seen the fact that PSCs will be closed in huge numbers and that ER will be a major tax relief being claimed over the next 12 to 36 months.

We have already seen restrictions and conditions being imposed that go beyond the original brief and terms of reference.

I cannot for a moment think that HMRC will be waving through claims when they see just how much they could collect.

Do not rely upon a friend or a man down the pub or indeed a bookkeeper. None of them are tax professionals.

Get proper advice.

[craigy1874]

Thanks for the many replies for some reason I was no longer getting notifications about updates to this thread and decided to browse directly just in case. I just want to draw a line with this company and start again with a new accountant and create a new ltd to include my wife.

So it seems what my accountant wants to do is normal ....

accountant has said the process is I need 3 months of trading free before closure so they will extend my end of year by 3 months to end of Feb and it will be advertised in the standard just in case any creditors including HMRC want to make a claim. Anything remaining in account I will have to take as dividends, no other tax efficient method to extract.

Seems overkill, friend of mine said he just didn't file any 1st year accounts and he was struck off anyway .... is this legal or possible ? Or any other method ? Or my accountant knows what they are doing.

Why do accountants keep on recommending this 'extend the accounting period by 3 months' nonsense?

Jesus man it's not difficult!

[ChimpMaster]

At risk of being deemed a doom sayer and hopefully avoiding being a Cassandra, please, please be careful.

HMRC has seen the fact that PSCs will be closed in huge numbers and that ER will be a major tax relief being claimed over the next 12 to 36 months.

We have already seen restrictions and conditions being imposed that go beyond the original brief and terms of reference.

I cannot for a moment think that HMRC will be waving through claims when they see just how much they could collect.

Do not rely upon a friend or a man down the pub or indeed a bookkeeper. None of them are tax professionals.

Get proper advice.

Hi G

Why will there be PSCs closing in huge numbers in particular over the next 12 - 36 months? Is this related to contractors leaving the business due to the new IR35 Private sector rules?

What restrictions are you referring to?