Calling it a day in 12-24 months - and Entrepreneur's relief

[TimeToQuit]

Hello All,

I am a contractor/freelancer, and will be looking to wind up and close my company in the next 12-24 months. It will be a complete shut down, I would not be planning to return to contracting/freelancing at all in the future.

My complications are:

1) The company currently has around £130,000 in cash on hand (in current, reserve and bond accounts) which will grow slightly in the next 12 months
2) The company also owns a house which is rented out as a BTL investment (to gain income, to stop having so much cash on hand, and to gain a better return than a bond). Current value is around £200,000

I am thinking of using MVL Online as part of the wind up, and have reached out to them for their thoughts on the subject - but I want to make sure all my ducks are in a line before I push the button.

So my questions would be:

1) Is MVL the best choice for this? Has anybody had any good or bad expeirences of them in the past?
2) Would this much cash and the property allow me to claim ER as part of the wind up
3) Would it be better to sell the property as part of the wind-up, or before winding up the company in terms of tax and ER?
4) Is there any Gotchas or other things I should be thinking about before I start to shut my business down?

Thanks all in advance

[ChimpMaster]

You've complicated it by buying the property within the company. This could very well negate any claim for ER. Even selling the property now might not help get ER - it depends on how large the investment/return is when compared to your actual trading (contracting) income.

Why not keep the company active as a property rental business? Buy another property with the excess company funds and you've then pretty much created an income stream for life.

[Maslins]

I am thinking of using MVL Online as part of the wind up, and have reached out to them for their thoughts on the subject

I thought your comments sounded familiar, hopefully you've now got our (private email) response. Rather than repeat in full here, but for the benefit of others reading:
- buying a BTL property through the company could hinder your chances of qualifying for ER (as ChimpMaster says). It's a very clear "investment" you've made, so blurring the lines of whether your company can fully be considered a "trading" one.
- MVL Online wouldn't be able to deal with the liquidation due to the investment property.

[AtW]

ER is about to get nuked in a few weeks time

[simes]

Why not keep the company active as a property rental business? Buy another property with the excess company funds and you've then pretty much created an income stream for life.

Must admit, this is what I have done.

MyCo already had one property in it. Anticipating in 2018 that contracting might no longer be possible by 2020, I bought another one through it with the idea of doing just this, making it a Property company.

That said, in respect of the OP's point, as a first point, is it possible to pay some stamp duty and move it across from LtdCo ownership to personal ownership?

Then as a second point, would the ER element then no longer be an issue for his cash reserves?

[LondonManc]

You've complicated it by buying the property within the company. This could very well negate any claim for ER. Even selling the property now might not help get ER - it depends on how large the investment/return is when compared to your actual trading (contracting) income.

Why not keep the company active as a property rental business? Buy another property with the excess company funds and you've then pretty much created an income stream for life.

I concur - subject to confirming it with your accountant of course!

[WordIsBond]

ER is about to get nuked in a few weeks time

I've yet to be convinced that the current lot can even manage a budget in a few weeks time. But if they do, not sure they'll manage anything new. Expect a consultation to be announced and nuke it at the autumn budget statement.

[Bradley]

holding a BTL property doesn't stop you getting ER but the MVL TAAR may

the ER test is to do with time spent on other activities other than trading. If the BTL property is managed by an agent then you probably spend not much time on it. The same holds true for large cash deposits. you can still approach HMRC under the non-statutory clearance regime and get their opinion for ER purposes.

The liquidation targeted anti-avoidance rule introduced in 2016 means that you are under threat of HMRC deeming the liquidation distribution as an income distribution and therefore subject to dividend income tax at 38.1% if they decide that you haven't really retired from the contracting business.

[TimeToQuit]

the ER test is to do with time spent on other activities other than trading. If the BTL property is managed by an agent then you probably spend not much time on it. The same holds true for large cash deposits. you can still approach HMRC under the non-statutory clearance regime and get their opinion for ER purposes.

The liquidation targeted anti-avoidance rule introduced in 2016 means that you are under threat of HMRC deeming the liquidation distribution as an income distribution and therefore subject to dividend income tax at 38.1% if they decide that you haven't really retired from the contracting business.

Thanks all for the information thus far. In terms of the above....

1) Its fully managed by a property firm - so next to zero time spent on it
2) It will be a true retirement. As in, dumping computer equipment and moving into a small holding somewhere.

[ChimpMaster]

Thanks all for the information thus far. In terms of the above....

1) Its fully managed by a property firm - so next to zero time spent on it
2) It will be a true retirement. As in, dumping computer equipment and moving into a small holding somewhere.

It's more to do with the size of the investment and then income received from it, rather than the time spent on it. I don't have time to go into detail but a quick Google will point you in the right direction.