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Going Perm - Close Ltd co? what about Company car on HP?

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    Going Perm - Close Ltd co? what about Company car on HP?

    Hi- long time lurker, first time poster.

    I have had a Ltd. co for 5 years. Due to the market dying I am moving to a senior perm role with one of the big 4.

    I am planning to be perm for at least 3-5 years.

    The big 4 firm has requested that I close my company/ make it dormant or use it only to receive payments for work done prior to joining the firm t the end of July

    By this time, the Ltd company will have about £50k in the bank, with another £15k in outstanding invoices & £15K corp tax and vat to pay. So effectively about £40k as payable dividends, factoring in salary and expenses between now and end of July.

    Normally I would close the company to save accounting fees/ administration over the next 5 years. i realise i could prob negotiate a reduction in accounting fees if the company is dormant.

    However- here's a possible complication: The company has a electric car, bought on hire purchase from Tesla, with low or neglible BIK.

    Overall agreement is for roughly £60k, of which roughly £39k is still payable in another 39 monthly instalments.

    Should I keep the company going to continue the car payments? Is this breaking any rules? or would it be better for the company to sell the car to me?

    Clearly I am looking to comply with all accounting rules/ HMRC and my new employer, but I am not clear on the best course of action.

    Any advice much appreciated.

    #2
    Originally posted by bongo77 View Post
    Hi- long time lurker, first time poster.

    I have had a Ltd. co for 5 years. Due to the market dying I am moving to a senior perm role with one of the big 4.

    I am planning to be perm for at least 3-5 years.

    The big 4 firm has requested that I close my company/ make it dormant or use it only to receive payments for work done prior to joining the firm t the end of July

    By this time, the Ltd company will have about £50k in the bank, with another £15k in outstanding invoices & £15K corp tax and vat to pay. So effectively about £40k as payable dividends, factoring in salary and expenses between now and end of July.

    Normally I would close the company to save accounting fees/ administration over the next 5 years. i realise i could prob negotiate a reduction in accounting fees if the company is dormant.

    However- here's a possible complication: The company has a electric car, bought on hire purchase from Tesla, with low or neglible BIK.

    Overall agreement is for roughly £60k, of which roughly £39k is still payable in another 39 monthly instalments.

    Should I keep the company going to continue the car payments? Is this breaking any rules? or would it be better for the company to sell the car to me?

    Clearly I am looking to comply with all accounting rules/ HMRC and my new employer, but I am not clear on the best course of action.

    Any advice much appreciated.
    You need to be confident you have an HP agreement and not a lease or PCP. Then, you need to discuss with the HP company as they are the owners of the car. You could do a voluntary surrender but best avoid this as it will hammer your credit record and could leave you with some debt that you would need to repay.

    If you have paid over half of the total finance amount, then you can voluntarily terminate the deal legally. if you havent paid back 50% of the finance then you may find it harder handing the car back.

    Bear in mind the car market has shifted drastically since the covid 19 outbreak but was tuliping beforehand. In previous years, HP companies may have worked with you even if you havent paid back more than 50% of the finance but may now play hardball because there's a severely restricted market out there with fewer buyers etc.

    You wont beable to sell the car to yourself without the finance company's agreement. You need to discuss options with them.

    You can keep your co open as long as you want but will need to file returns even if not trading.

    Comment


      #3
      Originally posted by bongo77 View Post
      Hi- long time lurker, first time poster.

      I have had a Ltd. co for 5 years. Due to the market dying I am moving to a senior perm role with one of the big 4.

      I am planning to be perm for at least 3-5 years.

      The big 4 firm has requested that I close my company/ make it dormant or use it only to receive payments for work done prior to joining the firm t the end of July

      By this time, the Ltd company will have about £50k in the bank, with another £15k in outstanding invoices & £15K corp tax and vat to pay. So effectively about £40k as payable dividends, factoring in salary and expenses between now and end of July.

      Normally I would close the company to save accounting fees/ administration over the next 5 years. i realise i could prob negotiate a reduction in accounting fees if the company is dormant.

      However- here's a possible complication: The company has a electric car, bought on hire purchase from Tesla, with low or neglible BIK.

      Overall agreement is for roughly £60k, of which roughly £39k is still payable in another 39 monthly instalments.

      Should I keep the company going to continue the car payments? Is this breaking any rules? or would it be better for the company to sell the car to me?

      Clearly I am looking to comply with all accounting rules/ HMRC and my new employer, but I am not clear on the best course of action.

      Any advice much appreciated.
      Having done exactly what you are doing contractor -> big 4 (and now back contracting again after 10 good years in the firm) I can guarantee they will be all over you to close down the company, so having any assets owned by it that you are still paying for will cause you issues.

      This isn't them being a-holes (although they are very capable of that - I know I got good at being one too) - it's a requirement of the Audit licence

      Comment


        #4
        What dogsnads says is true for a personal deal. Those are covered by different legislation.

        For a business deal there are different laws. The rules might be the same. Dogsnads can maybe confirm..

        However if you’re closing the company then credit records are me among less. And the liability is limited. Talk to your accountant about closing the company and handing the car back. If you can close the company legally and it owes money it’s not your problem.
        See You Next Tuesday

        Comment


          #5
          Explain situation to new employer get them to take over the lease


          Sent from my iPhone using Contractor UK Forum

          Comment


            #6
            Originally posted by bongo77 View Post
            Hi- long time lurker, first time poster.

            I have had a Ltd. co for 5 years. Due to the market dying I am moving to a senior perm role with one of the big 4.

            I am planning to be perm for at least 3-5 years.

            The big 4 firm has requested that I close my company/ make it dormant or use it only to receive payments for work done prior to joining the firm t the end of July

            By this time, the Ltd company will have about £50k in the bank, with another £15k in outstanding invoices & £15K corp tax and vat to pay. So effectively about £40k as payable dividends, factoring in salary and expenses between now and end of July.

            Normally I would close the company to save accounting fees/ administration over the next 5 years. i realise i could prob negotiate a reduction in accounting fees if the company is dormant.

            However- here's a possible complication: The company has a electric car, bought on hire purchase from Tesla, with low or neglible BIK.

            Overall agreement is for roughly £60k, of which roughly £39k is still payable in another 39 monthly instalments.

            Should I keep the company going to continue the car payments? Is this breaking any rules? or would it be better for the company to sell the car to me?

            Clearly I am looking to comply with all accounting rules/ HMRC and my new employer, but I am not clear on the best course of action.

            Any advice much appreciated.
            If you have claimed AIA on the electric car in an earlier, there will be a balancing charge in your final set of accounts. The remaining HP liability will need to be transferred to you personally so you would need to discuss this with Tesla, surely they have been through this process before. You will not be able to otherwise close the company if you have an outstanding liability. Provided that you are able to take over the HP agreement under your personal name, your accountant can then advise you on the AIA claim and the balancing charge in your final set of trading accounts.

            Comment


              #7
              Originally posted by GhostofTarbera View Post
              Explain situation to new employer get them to take over the lease


              Sent from my iPhone using Contractor UK Forum
              Based on what they say about it being a Big 4 they won't.

              It sets a huge precedent - he will have to dispose/purchase the car legally as soon as possible

              Comment


                #8
                Originally posted by oilboil View Post
                Based on what they say about it being a Big 4 they won't.

                It sets a huge precedent - he will have to dispose/purchase the car legally as soon as possible
                And add this little tale to the list of reasons why company cars don’t make sense.
                See You Next Tuesday

                Comment

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