contractor goes perm with mvl and wants to go back to contracting contractor goes perm with mvl and wants to go back to contracting
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  1. #1

    Default contractor goes perm with mvl and wants to go back to contracting

    TL;DR;
    I liquidated my LTD company and went for a permanent position. Unfortunately, it did not work out and I want to go back to contracting, but I can't open a new LTD for 1.5 year. What are my options?

    I was a contractor for many years and around 1.5 year ago I decided to try a very promising permanent position in a small company. After a probation period I decided to liquidate my LTD and it took as usual more than 6 months. A final Capital Distribution was performed about 6 months ago. Unfortunately, after that the situation in my current employment deteriorated dramatically and I will be leaving the place soon.
    I was wondering, what options do I have? I can't start a new LTD for the next 1.5 year. Can I go back to contracting? Do I have to use PAYE Umbrella?
    Sorry, I could not find a similar topic so I am writing.

    Thanks for your help

  2. #2

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    Quote Originally Posted by londondeveloper View Post
    Do I have to use PAYE Umbrella?
    Yep.

  3. #3

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    Quote Originally Posted by londondeveloper View Post
    TL;DR;
    I liquidated my LTD company and went for a permanent position. Unfortunately, it did not work out and I want to go back to contracting, but I can't open a new LTD for 1.5 year. What are my options?

    I was a contractor for many years and around 1.5 year ago I decided to try a very promising permanent position in a small company. After a probation period I decided to liquidate my LTD and it took as usual more than 6 months. A final Capital Distribution was performed about 6 months ago. Unfortunately, after that the situation in my current employment deteriorated dramatically and I will be leaving the place soon.
    I was wondering, what options do I have? I can't start a new LTD for the next 1.5 year. Can I go back to contracting? Do I have to use PAYE Umbrella?
    Sorry, I could not find a similar topic so I am writing.

    Thanks for your help
    Short answer, nope.

    Long answer, a bit of work would need doing to review the exact situation, timings , detailed reasoning etc. to make sure there is a strong case to defend against HMRC challenge but it seems to me that avoiding tax wasn't the motivating factor in closing the company down and as such you wouldn't be caught by anti avoidance legislation and as such free to operate via a Limited company again.

    Martin
    Contratax Ltd

  4. #4

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    Quote Originally Posted by ContrataxLtd View Post
    Short answer, nope.

    Long answer, a bit of work would need doing to review the exact situation, timings , detailed reasoning etc. to make sure there is a strong case to defend against HMRC challenge but it seems to me that avoiding tax wasn't the motivating factor in closing the company down and as such you wouldn't be caught by anti avoidance legislation and as such free to operate via a Limited company again.

    Martin
    Contratax Ltd
    Martin is right. People get caught up in the two year thing as if it is the only test, but it isn't.

    You'd want to be able to construct a very solid paper trail showing your motivations step by step. Especially if you can document that the deterioration in your current position has only been very recent, that would probably be quite helpful.

    You said you are leaving quite soon -- voluntarily or involuntarily? The latter, if demonstrable, would also strengthen your case. Even if it is 'by mutual agreement,' if the suggestion that maybe it is time to part ways came from them first, that would help. The reason is you want to establish that your motivation was not to get your cash and then immediately bounce back to contracting. If you are bouncing back to contracting because they left a footprint on your backside when they kicked you out the door, even HMRC is going to have a hard time arguing your motivation was tax avoidance.

    All that said, six months isn't very long after the final distribution, and a cynic might say that you sabotaged the relationship once you got the last of your MVL money, so you could go back to contracting. So there's some risk here for you. If you are risk averse, you could just go umbrella for a while. But (depending on your rate) it might mean quite a bit of money, so it might be worth paying someone who knows what they're about to look carefully at the specifics of your situation.

    Of course, if you think IR35 changes mean we are all going to be locked inside IR35 permanently in a year's time, then you might as well just go brolly now and save yourself the hassle. I don't think that way, but some do.

  5. #5

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    Get another permie job to prove you aren't taking the piss then see what happens with IR35, dividend tax, MTD, etc and whether it would still make sense to contract via a Ltd rather than brolly if you still feel permiedom is a huge mistake after giving it a second chance.
    Maybe tomorrow, I'll want to settle down. Until tomorrow, I'll just keep moving on.

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