UK Contractor moving to New Zealand

[niai07]

Hi All,

I appreciate an accountant will be best placed to advise on this, however my current accountant was unable to advise so I am looking for another. In the meantime, I thought I would see if anyone here can provide any insight into my situation.

I am the sole director of a UK Ltd company and have been contracting in evenings and weekends for the past year, as well as holding a perm position, paying myself dividends. Hence, there is a reasonable amount of cash in the business.

I am moving with my partner to New Zealand early next year, and am unsure how I should proceed. I doubt I will be contracting over there, and if I am, I feel the best/simplest thing to do would be to set up a company in NZ. Therefore, I am considering winding up my UK Ltd company and am unsure of the best way to extract the funds (I am a higher-rate tax payer at the moment).

As far as I understand, the winding down of a company takes some time and the funds would not be received for several months i.e. If I start the process to close the business early next year, it will be tax year 2019-20 by the time I receive the funds, by which time I will a tax resident in NZ and not UK.

My question is would CGT only be payable in NZ or would I also be subject to any personal tax on the income in the UK? It doesn't seem that there is any CGT in NZ, so this could be a tax efficient option for me, but want to make sure everything is above board.

Any experience anyone can share is much appreciated.

[northernladuk]

It would be useful to know how much we are talking here.

[niai07]

It would be useful to know how much we are talking here.

Around £35-40k by the end of this year.

[northernladuk]

Around £35-40k by the end of this year.

Speak to Chris Maslin at MVLOnline (or message him on here as he posts alot) and have a word. He will give you leveled advice on the timescales and whether it's worth following the MVL route.

If timings is your real issue you might have to take the tax hit and divi it out.

You could of course add your kids, wife, dog and goldfish to the company and divi it out tax free. In the unlikely event you get caught you'll be gone.

[Old Greg]

My own experience of closing down a UK company while resident in Ireland, is that the taxes were due in the UK as the funds being distributed arose from trade in the UK.

[Maslins]

An ex Maslins client did exactly this, husband/wife company, liquidated via MVL Online whilst emigrating to NZ a few years back.

As the liquidation can take a few months, unless you take a hefty break in between stopping working in the UK and emigrating, it's likely you'll be in NZ at the time you get the funds. We therefore recommended they speak to an NZ accountant re possible tax implications of this. They were told that as long as they could demonstrate they'd paid UK personal tax on it, NZ wouldn't claim anything.

We decided whilst there may be some technical arguments that this wasn't correct (eg they'd lost their UK tax residency by the time they got the distributions) that it seemed fair/reasonable, as all funds were generated from the UK, whilst in the UK. So we did a further UK personal tax return declaring the liquidation distributions and paying UK CGT on them, and to the best of my knowledge they never suffered any NZ tax on that money.

[WordIsBond]

Is there a case for just paying £15K dividends before going to get under the £25K threshold and then closing it? Will the liquidation process be faster if it is under the threshold?

Or, alternatively, can't he take a preliminary MVL disbursement of almost all the money before he leaves? If so, that way if complications do arise on the final disbursement re: NZ tax, it will be on a small amount.

edit: on re-reading, I see OP was wanting to get the tax under the NZ regime, rather than the other way around. So my post is actually contrary to what he was hoping to achieve, and I am an idiot. I will therefore leave it there as a memorial to the benefits of reading carefully to see what someone actually said before responding.

NB: This will not prevent me from being sarcastic in future when someone else makes the same mistake.

[Maslins]

Is there a case for just paying £15K dividends before going to get under the £25K threshold and then closing it? Will the liquidation process be faster if it is under the threshold?

Yes-ish. I gather OP is already a higher rate taxpayer, so would need to weigh up extra tax on that £15k vs the benefits of not needing a liquidation. Also, whilst I think it's an area open to argument/quite grey, you can't just take £15k today and call it a dividend, then £24k tomorrow calling it part of closure. It should be based on the facts...which we'd tend to suggest means any dividends should be whilst the trade is clearly still ongoing, and the final payment should be clearly after trade has stopped. Otherwise you run the risk the taxman says either all £40k is dividends, or it's all part of closure...and if the latter and no MVL, then it'd be dividends anyway.

Ie basically if someone's going to try to be clever to get net assets just below £25k, ensure it's planned and done nicely in advance.

As an aside, another popular option in this kind of situation would be an employer pension contribution (assuming not already breached annual/lifetime caps). Be aware though that given it will likely get corporation tax relief, you'd likely need to put in something like £18.5k to reduce net assets by £15k.

Or, alternatively, can't he take a preliminary MVL disbursement of almost all the money before he leaves? If so, that way if complications do arise on the final disbursement re: NZ tax, it will be on a small amount.

Depends on timings. If OP wants to maximise earnings they may well work right up until perhaps a couple of days before departure. It's not realistic to get all tax related tidying up done, and liquidator appointed, and said liquidator gets funds to make a first distribution in such a short period of time. More expensive liquidators will be able to run concurrently with other things that could save a bit of time...but still.