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Best process for closing down LTD

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    Best process for closing down LTD

    So the day has come, I have accepted a permie role - doesn't start until end Jan, so until then I will be invoicing with final payment expected end Feb for my last invoice.

    I have the questions out with my accountant, but wanted to check the hivemind of knowledge on here

    Company has less than 25k in it, I think 17k distributable profit as it stands right now. I am assuming this means Strikeoff rather than MVL?

    What is the process and costs involved, and is it CGT as an end game?

    Secondly, my concern is around IR35. I am effectively going Perm the Monday after my final Friday as a contractor, and will have a period where the LTD company is still open as I await a) final invoice payment and b) cease the company process starts. It is a different role, very much more management than analyst, but same department and Line Manager.

    Does anybody have any specific examples/experiences/advice that can help me form a view? Accountant has been A++ but just waiting on a response and figured all knowledge is good.

    Ta

    #2
    Like you suggest if final net assets end up being sub £25k, you can get CGT treatment via a cheap and cheerful strike off (no need for a formal MVL). The actual strike off costs about a tenner to Companies House, but you'll need to tidy up your affairs first which your accountant will likely assist with.

    Some people have concerns re the Ltd Co --> permie/umbrella move, but I personally don't see it. Yes there will be a period where your company is still ticking over despite you starting a permanent role, nothing wrong with that.

    Comment


      #3
      Originally posted by Maslins View Post
      Like you suggest if final net assets end up being sub £25k, you can get CGT treatment via a cheap and cheerful strike off (no need for a formal MVL). The actual strike off costs about a tenner to Companies House, but you'll need to tidy up your affairs first which your accountant will likely assist with.

      Some people have concerns re the Ltd Co --> permie/umbrella move, but I personally don't see it. Yes there will be a period where your company is still ticking over despite you starting a permanent role, nothing wrong with that.
      Thanks - I have my concerns too, but I feel it is a safer bet than LTD - PAYE (I don't have much to base this on, more a hunch?!)
      Appreciate the info on CH.

      Comment


        #4
        Closing process should be straight forward. Profit being less than £25k, as Chris says, no need for the MVL route. You'd have to wait for your debtors to come in. Once they have paid your company, you'd then need to close the company bank account, transfer the money to yourself. Out of these funds, you'll need to pay for any bills such as corporation tax, PAYE, VAT etc. The accountant should then prepare a final set of accounts for you which will need to be submitted to HMRC. Once HMRC have agreed the final CT bill and you've paid it, you can then submit the striking off for at Companies House. Whilst this is all going on, your accountant should be deregistering you for VAT and PAYE.

        How much you get charged by the accountant for doing the job, only they can say. My standard advice would be to always hang on to your company for a few months before going down the closure route just in case you don't like your perm job. That way, you still have a vehicle to jump straight back into should it not work out for you as an employee.

        Comment


          #5
          Originally posted by Craig@Clarity View Post
          Closing process should be straight forward. Profit being less than £25k, as Chris says, no need for the MVL route. You'd have to wait for your debtors to come in. Once they have paid your company, you'd then need to close the company bank account, transfer the money to yourself. Out of these funds, you'll need to pay for any bills such as corporation tax, PAYE, VAT etc. The accountant should then prepare a final set of accounts for you which will need to be submitted to HMRC. Once HMRC have agreed the final CT bill and you've paid it, you can then submit the striking off for at Companies House. Whilst this is all going on, your accountant should be deregistering you for VAT and PAYE.

          How much you get charged by the accountant for doing the job, only they can say. My standard advice would be to always hang on to your company for a few months before going down the closure route just in case you don't like your perm job. That way, you still have a vehicle to jump straight back into should it not work out for you as an employee.

          Thanks Craig - some sound advice which ties in with my accountant.

          One thing I did wonder... I have to pay self assessment for remaining liability 18/19 (less amounts already paid), and then the 1st payment on account for 19/20... Bearing in mind I expect to close the company early Q2 2020, if any SE tax is due back to me I assume that a) it goes to my personal bank account and b) would that be a good reason for the accountants to stay on-board, as I would be nervous that without them as a means of comms with HMRC some messages will get lost aka money due back to me!

          Thanks

          Comment


            #6
            Originally posted by blueislander View Post
            Thanks Craig - some sound advice which ties in with my accountant.

            One thing I did wonder... I have to pay self assessment for remaining liability 18/19 (less amounts already paid), and then the 1st payment on account for 19/20... Bearing in mind I expect to close the company early Q2 2020, if any SE tax is due back to me I assume that a) it goes to my personal bank account and b) would that be a good reason for the accountants to stay on-board, as I would be nervous that without them as a means of comms with HMRC some messages will get lost aka money due back to me!

            Thanks
            Yes, if any personal tax has been overpaid, it'll ultimately come back to you personally (never to your accountant!). It'll be entirely up to you whether to retain the services of an accountant once your company has closed and all tax returns have been submitted but probably unnecessary. You'll need them to complete your company closure if you go ahead with it. As it falls into the current tax year, we'd assume you will get them to complete your 2019-20 personal tax return too. If everything is done and dusted for you in this tax year, you can write in the additional information box on your tax return to say that all your income for future tax years is through PAYE and taxed at source. HMRC will then confirm that you don't need to complete any more tax returns unless your circumstances change.

            Comment


              #7
              Originally posted by Craig@Clarity View Post
              Yes, if any personal tax has been overpaid, it'll ultimately come back to you personally (never to your accountant!). It'll be entirely up to you whether to retain the services of an accountant once your company has closed and all tax returns have been submitted but probably unnecessary. You'll need them to complete your company closure if you go ahead with it. As it falls into the current tax year, we'd assume you will get them to complete your 2019-20 personal tax return too. If everything is done and dusted for you in this tax year, you can write in the additional information box on your tax return to say that all your income for future tax years is through PAYE and taxed at source. HMRC will then confirm that you don't need to complete any more tax returns unless your circumstances change.
              Superb thank you

              Comment


                #8
                Originally posted by Craig@Clarity View Post
                Closing process should be straight forward. Profit being less than £25k, as Chris says, no need for the MVL route. You'd have to wait for your debtors to come in. Once they have paid your company, you'd then need to close the company bank account, transfer the money to yourself. Out of these funds, you'll need to pay for any bills such as corporation tax, PAYE, VAT etc. The accountant should then prepare a final set of accounts for you which will need to be submitted to HMRC. Once HMRC have agreed the final CT bill and you've paid it, you can then submit the striking off for at Companies House. Whilst this is all going on, your accountant should be deregistering you for VAT and PAYE.

                How much you get charged by the accountant for doing the job, only they can say. My standard advice would be to always hang on to your company for a few months before going down the closure route just in case you don't like your perm job. That way, you still have a vehicle to jump straight back into should it not work out for you as an employee.
                I know there is conflicting opinion on the issue of redundancy payments when closing down a company, but has there been any recent definitive case law which clarifies the issue? My accountant is advising that my wife and I would be entitled to redundancy payments as we have paid PAYE since setting up the company and the minimum wage for some time.

                Comment


                  #9
                  Originally posted by JohntheBike View Post
                  I know there is conflicting opinion on the issue of redundancy payments when closing down a company, but has there been any recent definitive case law which clarifies the issue? My accountant is advising that my wife and I would be entitled to redundancy payments as we have paid PAYE since setting up the company and the minimum wage for some time.
                  The only tax case that comes to mind was a few years back being The secretary of state for business, innovation and skills vs Knight. In that case, she was MS and sole shareholder claiming redundancy as she'd foregone her wages for a couple of years to try and keep the company afloat. It went through UK EAT and she was successful in her claim.

                  Your accountant is best placed to advise you on your specific case and circumstance. We don't know if you have a contract of employment, implied contract, what your role is in the company etc etc. They'll know the specifics and if they advised you can, then assume you can?...

                  Comment


                    #10
                    Originally posted by Craig@Clarity View Post
                    The only tax case that comes to mind was a few years back being The secretary of state for business, innovation and skills vs Knight. In that case, she was MS and sole shareholder claiming redundancy as she'd foregone her wages for a couple of years to try and keep the company afloat. It went through UK EAT and she was successful in her claim.

                    Your accountant is best placed to advise you on your specific case and circumstance. We don't know if you have a contract of employment, implied contract, what your role is in the company etc etc. They'll know the specifics and if they advised you can, then assume you can?...
                    Thanks for the response. I guess we both have had implied contracts as we have been employees of MyCo as well as directors since setting up in 1996. I guess as you say it will come down to our specific circumstances and it will depend on HMRC's view at the end of the day. I was just wondering whether or not there had been some recent case law which in effect prevented redundancy being paid. It seems the only case law might be in favour of redundancy being allowed.

                    Secretary of State for Business, Innovation and Skills v Knight UKEAT/0073/13/RN

                    I think the crucial statement is -

                    "the respondent had not brought the contract to an end"

                    which until I'd seen this judgement was my contention. If the company had ceased trading as a result of issues not under the control of the directors, then any employees of that company, even if they were also directors, should be awarded redundancy payments. I guess the case might be stronger if there were no payout from HMG funds for the redundancies, i.e. the payments were made from company assets, or at least shown as book entries when the company were to be closed down.
                    Last edited by JohntheBike; 27 November 2019, 14:40.

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