Hi all,
I have been working as a contractor in the UK since 2017, under a Tier 5 Youth Mobility visa. This visa runs for a maximum of 2 years and allows the holder (among other things) to run a Limited Company and work as a contractor.
Thus, I ran my Limited Company for 2 years, after which, just last month, I initiated liquidation via MVL with ER.
So far, not a peep from HMRC.
(Also, in the prior two years, I had drawn very little in dividends, on the advice of my advisor.)
In the last few weeks, I have decided I wanted to pursue a permanent position in the UK.
Due to my prior Tier 5 visa having expired, the rules no longer permit me to run a limited company and work as a contractor in the UK.
What concerns me is the rather wide umbrella cast by the wording of ITTOIA05/404A conditions C and D.
Condition C:
It would seem that I would be doing the same kind of work in my new permanent employee role as I was when running my Limited Company, so it would appear that I satisfy Condition C.
However, I wonder to what extent I would or would not satisfy Condition D:
While I definitely chose the ER route over any other winding-up route due to its tax efficiency, I also feel that it would be unreasonable to suggest that this was also the main reason for closing the business.
The main reason for closing the business, from my point of view, was that my prior UK visa had expired, and thus I was no longer permitted to operate a business in the UK.
I can't say for sure whether I would have continued to operate a business in the UK had the visa rules been different. That seems a hypothetical question. I might have or I might have not.
What do you's think?
Would you say that I could be reasonably confident in proceeding with the MVL and ER, on the basis that it's impossible to do business any longer in the UK under the visa rules, and thus, my intention was to close the company for that reason, and not to gain a tax advantage?
Or would the fact that I am now pursuing permanent employment in the UK suggest that I satisfy Condition D, i.e., that I am closing the business for the tax advantage and that in some kind of alternate universe where visa rules don't apply, I would have continued to run the business?
I have been working as a contractor in the UK since 2017, under a Tier 5 Youth Mobility visa. This visa runs for a maximum of 2 years and allows the holder (among other things) to run a Limited Company and work as a contractor.
Thus, I ran my Limited Company for 2 years, after which, just last month, I initiated liquidation via MVL with ER.
So far, not a peep from HMRC.
(Also, in the prior two years, I had drawn very little in dividends, on the advice of my advisor.)
In the last few weeks, I have decided I wanted to pursue a permanent position in the UK.
Due to my prior Tier 5 visa having expired, the rules no longer permit me to run a limited company and work as a contractor in the UK.
What concerns me is the rather wide umbrella cast by the wording of ITTOIA05/404A conditions C and D.
Condition C:
"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"
It would seem that I would be doing the same kind of work in my new permanent employee role as I was when running my Limited Company, so it would appear that I satisfy Condition C.
However, I wonder to what extent I would or would not satisfy Condition D:
"it is reasonable to assume that the main purpose, or one of the main purposes of the winding up is the avoidance or reduction of a charge to Income Tax."
While I definitely chose the ER route over any other winding-up route due to its tax efficiency, I also feel that it would be unreasonable to suggest that this was also the main reason for closing the business.
The main reason for closing the business, from my point of view, was that my prior UK visa had expired, and thus I was no longer permitted to operate a business in the UK.
I can't say for sure whether I would have continued to operate a business in the UK had the visa rules been different. That seems a hypothetical question. I might have or I might have not.
What do you's think?
Would you say that I could be reasonably confident in proceeding with the MVL and ER, on the basis that it's impossible to do business any longer in the UK under the visa rules, and thus, my intention was to close the company for that reason, and not to gain a tax advantage?
Or would the fact that I am now pursuing permanent employment in the UK suggest that I satisfy Condition D, i.e., that I am closing the business for the tax advantage and that in some kind of alternate universe where visa rules don't apply, I would have continued to run the business?
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