MVL alternative? MVL alternative? - Page 2
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  1. #11

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    Quote Originally Posted by Maslins View Post
    Certainly no reason why you can't drip feed salary/dividends/pension contributions over several years. A few things to mention:
    - for the salary/pension, you'll likely have no issue getting CT relief the first year or two, but if you continue for a while with no company income to offset these against, it will limit what further CT relief you can get.
    - for salary/dividends, whether it's a good idea depends on your other income. If you've gone into a high paid job/are on a hefty pension, with you being in higher rates by virtue of that, this option probably isn't a good one for you. If on the other hand you'll have no/negligible other income for a while (so personal allowance/basic rate band available), which sounds like it may be the case for you, it can work well.
    - you will have ongoing accounting responsibilities if you keep the company going a few years. If you need assistance with this, there will be a cost associated. If your main concern is re professional fees, unsure how that will stack up against the cost of an MVL.
    Doesn't the nature of his business change to an investment one as that's all it is doing year in year out which affects something or other?
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  2. #12

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    Quote Originally Posted by northernladuk View Post
    Doesn't the nature of his business change to an investment one as that's all it is doing year in year out which affects something or other?
    If the OP opts for their suggestion, then there won't be a capital gain for BADR (what was ER) to be considered, hence trading vs investment not relevant for that purpose. I can't think of any other obvious things that trading vs investment might be relevant to.

  3. #13

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    Quote Originally Posted by Maslins View Post
    Certainly no reason why you can't drip feed salary/dividends/pension contributions over several years. A few things to mention:
    - for the salary/pension, you'll likely have no issue getting CT relief the first year or two, but if you continue for a while with no company income to offset these against, it will limit what further CT relief you can get.
    If the company doesnt have any income in a particular year wouldn't company pension contributions be pointless for tax savings. It will be offset from the corp tax, but if no income, no profit (in fact there will be loss), no corp tax, no relief.
    I guess if you want to draw down money from LTD that is OK.

    However wouldn't it be better to be on £52k salary with £40k salary sacrifice? This way you pay a bit of NICs, but get tax refund on the full £40k (incl. the tax free £12k). Or I am wrong?

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    Quote Originally Posted by win10 View Post
    If the company doesnt have any income in a particular year wouldn't company pension contributions be pointless for tax savings. It will be offset from the corp tax, but if no income, no profit (in fact there will be loss), no corp tax.
    I guess if you want to draw down money from LTD that is OK.

    However wouldn't it be better to be on £52k salary with £40k salary sacrifice? This way you pay a bit of NICs, but get tax refund on the full £40k (incl. the tax free £12k). Or I am wrong?
    I think you are demonstrating there that you don't know how salary sacrifice actually works.
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    Quote Originally Posted by eek View Post
    I think you are demonstrating there that you don't know how salary sacrifice actually works.
    Why?
    Explain then.

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    Quote Originally Posted by win10 View Post
    Why?
    Explain then.
    It's in the name, you sacrifice your salary and in return the company pays it directly into your pension pot.
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    Quote Originally Posted by eek View Post
    I think you are demonstrating there that you don't know how salary sacrifice actually works.
    Seems to be a common theme with that poster....
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  8. #18

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    Quote Originally Posted by spindrift View Post
    Is there a legal reason why I cannot run the business for several more years and continue to pay myself salary, dividends (*capped at base-rate) and expense pension contributions while having no turnover?
    People here are always saying speak to your accountant.
    Well, my accountant said I shouldn't be drawing a salary if the company isn't trading i.e. company has no revenue due to me being out of contract.
    I'll be interested to see what the comments in this thread have to say about it.

  9. #19

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    Quote Originally Posted by rascal View Post
    People here are always saying speak to your accountant.
    Well, my accountant said I shouldn't be drawing a salary if the company isn't trading i.e. company has no revenue due to me being out of contract.
    I'll be interested to see what the comments in this thread have to say about it.
    It depends on whether the company is solvent and can afford the salary. If it is, and it can, then it should (assuming no other salary).

    Sounds like you need a new accountant. Or you need to provide the relevant details that he used to provide that advice.

    Paying a salary makes the company trading in any case. So what makes you think it’s not trading? Just having no revenue right now is not the same as “not trading”. For a start I only invoice every 4 weeks and that doesn’t make me not trading for the 3 intervening weeks.
    Last edited by Lance; 1st December 2020 at 18:32.
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  10. #20

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    Quote Originally Posted by Lance View Post
    Or you need to provide the relevant details that he used to provide that advice.
    There are no unusual circumstances. The company had ample retained profit to pay salary and dividends, but the accountant advised most expenses are only allowed if they relate to trading, and the company stops trading from the point it stops generating income.

    They also advised that an employer pension contribution could not exceed operating profit in the year the contribution was made, otherwise the excess would be disallowed for corporation tax.

    So if the OP was using the same accountant as myself, they would presumably be advised that they should not take a salary, would not be able to make employer pension contributions (as there would be no operating profit), but could continue taking dividends (which come from retained profit).

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