Closing LTD options Closing LTD options
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  1. #1

    Nervous Newbie


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    Default Closing LTD options

    I took a full time PAYE position a couple of years ago and haven't had any trading in my LTD for around 18 months. I've been slow to enter anything like dormancy / closure due to being super busy, I miss being my own boss

    In my time running the LTD I amassed a war chest which totals ~£60k, which felt prudent. It feels a bit like it is trapped in there now. I'd like to stop spending accountancy fees and reduce the war chest. Dividend tax rates have changed since most of it was amassed. It feels like wrapping up is my easiest option. I know the top three options are valid, but what about my other options:
    1. Dormancy - put it on ice, taking <£2k dividend tax free for next 30 years, not that patient.
    2. Striking Off - could take £25k as Capital Gain at 10% tax, rest as dividend taxed at 32.5%.
    3. MVL - could take full amount as Capital Gain at 10% tax. Can't go back to contracting for at least two years which could turn out to be a problem. I've been quoted about £3k of fees to arrange an MVL.
    4. Reduce company capital prior to Striking Off or MVL.


    Thoughts for reducing company capital:
    1. Pension Contribution - could I make a ~£35k pension prior to Striking Off. This would be tax free, but would be from post Corporation Tax capital so inefficient in comparison to having done it in the tax year it was earned. Under any other circumstances, making a pension contribution would be an option open to me that results in lower tax so I hope it wouldn't be considered tax avoidance.
    2. Company buys back my shares - am I able to sell the company back my shares at a rate of <£12k per year. This would represent a personal capital gain, but less than the £12k tax free allowance.


    I'm not looking to reduce the tax bill below what it should have been if I had been better prepared / organised. I dn't want to do anything that could be taken as Tax Avoidance . Making a pension contribution would be nice as my pension hasn't received the love it should have, but it is painful that it is post Corporation Tax so could have been 25% more.

  2. #2

    Contractor Among Contractors


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    Default

    You may be able to carry back the loss created by a hefty pension contribution (ie to still get corporation tax relief). Check that with your accountant.

    Otherwise, you should be able to get an MVL for about half what you've been quoted, as long as the balance sheet is nice and simple (ie just cash, no other assets, and no liabilities).

  3. #3

    Nervous Newbie


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    Default

    Thanks Maslins

    Quote Originally Posted by Maslins View Post
    You may be able to carry back the loss created by a hefty pension contribution (ie to still get corporation tax relief). Check that with your accountant.
    Do you think the loss could be carried back two years to when the LTD actually had a big enough Corporation Tax bill?

    Quote Originally Posted by Maslins View Post
    Otherwise, you should be able to get an MVL for about half what you've been quoted, as long as the balance sheet is nice and simple (ie just cash, no other assets, and no liabilities).
    It would be simple as it is only cash. Thanks fro he heads up, I will shop around, but my main concern is the two year lockout as you never know what is down the line.

  4. #4

    Contractor Among Contractors


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    Quote Originally Posted by TechnoBob View Post
    Do you think the loss could be carried back two years to when the LTD actually had a big enough Corporation Tax bill?
    Potentially via terminal loss relief...but yeah one to check with your accountant.

    Quote Originally Posted by TechnoBob View Post
    It would be simple as it is only cash. Thanks fro he heads up, I will shop around, but my main concern is the two year lockout as you never know what is down the line.
    It's not a "lockout" as such, nothing to stop you liquidating then setting up a new company the next day...you just may well find the tax benefits (CGT treatment) of doing so wouldn't be available.

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