Question about Business Asset Disposal Relief qualifying period

[concord]

Hello. There seem to be a lot of threads recently about MVL so I'll try to keep this short. Also, I will discuss this with my accountant but I still want to ask here since others have experience with it.

I'm considering a permanent role and what I need to do with my current business if I pursued that. From what I can gather, an MVL is ideal for my company. I've been studying the process on this page: Business Asset Disposal Relief (was Entrepreneurs Relief) | MVL Online(R) I think I heard about MVL Online on this forum.

My questions pertain to the section on the qualifying period. Earlier this year, I gifted my spouse 30% of the business. I understand that she won't qualify for this relief until early 2022.

Here are my questions:

• If I took a permanent role, could we leave the company open and wait until two years has passed? If the company isn't invoicing, is that considered ceasing to trade or is that a formal process/declaration? What if the company is funding a joint project and I continue working on that (moonlighting)? It's not earning any money (yet...) but there are expenses.
• Can liquidators like MVL Online liquidate companies where one director qualifies for relief but the other doesn't? How can I find out how much more the non-qualifying director will be taxed?
• I suppose she could gift back the shares but this seems a bid dodgy. I'm not sure though... does anyone have thoughts on this?

I've just started exploring what my options are so please let me know if I'm missing anything. Thanks.

[WTFH]

If I took a permanent role, could we leave the company open and wait until two years has passed?

Sure.

If the company isn't invoicing, is that considered ceasing to trade or is that a formal process/declaration?

No, it hasn’t ceased trading just because it hasn’t raised an invoice.

What if the company is funding a joint project and I continue working on that (moonlighting)? It's not earning any money (yet...) but there are expenses.

Ah, now we get to the crunch. You want to buy stuff through your business.
It’s a “joint project” - nice and vague.
It’s funding - almost sounds like charity.
and of course, it’s got expenses - again, undisclosed.

Without the complete picture, most advice you will get will not be what you want to hear, and I somehow suspect that with the complete picture, the advice will be the same.

[concord]

I only wanted to know if continuing to work on a non-client project part time would mean the company was still considered trading. I referenced the expenses to highlight that the company still wouldn't be earning money, just spending a tiny bit on hosting to keep the project development going. Since trading doesn't mean invoicing, this probably doesn't matter.

Has any went through the MVL process where one director qualified for relief and the other didn't? It seems like the trade-off is the non-qualifying director paying more tax or waiting with the risk that the relief program could be axed.

[malvolio]

Not actually sure how you can simultaneously go through an MVL while continuing to operate the company. I'm not an expert in these things but it sounds just a little contradictory...

[WTFH]

I only wanted to know if continuing to work on a non-client project part time would mean the company was still considered trading. I referenced the expenses to highlight that the company still wouldn't be earning money, just spending a tiny bit on hosting to keep the project development going. Since trading doesn't mean invoicing, this probably doesn't matter.

Has any went through the MVL process where one director qualified for relief and the other didn't? It seems like the trade-off is the non-qualifying director paying more tax or waiting with the risk that the relief program could be axed.

If you are wanting to keep the company going, then you can't MVL it.
If you want to put expenses through it, then you can't MVL it without implications.
If you want one shareholder to sell their shares to the other, that's perfectly fine. No MVL involved, the company is still trading.
If you want one director to resign, that's perfectly fine. No MVL involved, the company is still trading.

So, now if we go to your second point: You decide you want to close the company down, no expenses, no more hosting or project development, just shut up shop and get the money out. In that case the best thing to do is to engage someone like Maslins at MVLOnline. They can go through the actual setup of your company and work out the best way to do it. But are you wanting to close it down based on the scare stories doing the rounds that all tax benefits are disappearing on 6th April 2021 (or something like that)?

[concord]

My goal now is to figure out what to do with my company if I were to take on a permanent role.

Because I gifted my wife 30% of the company earlier this year, my understanding is that she wouldn't qualify for the Business Asset Disposal Relief on her shares until early 2022. Should we wait to start the liquidation process?

MVL Online says this:

[Business Asset Disposal Relief - Qualifying Period] All the above needs to have applied for two full years. This will either be the period prior to the liquidation commencing, or the period prior to the trade ceasing if trade ceases prior to liquidation.

I'm trying to figure out if she will "pass" the qualifying period if I were take a permanent position but not make any administrative changes to our company except stopping client work/invoicing.

I will try to reach out to some liquidators to find out.

[Lance]

My goal now is to figure out what to do with my company if I were to take on a permanent role.

Because I gifted my wife 30% of the company earlier this year, my understanding is that she wouldn't qualify for the Business Asset Disposal Relief on her shares until early 2022. Should we wait to start the liquidation process?

MVL Online says this:



I'm trying to figure out if she will "pass" the qualifying period if I were take a permanent position but not make any administrative changes to our company except stopping client work/invoicing.

I will try to reach out to some liquidators to find out.

No....


If you go permanent, for at least two years, and intend to dispose of the company for a capital gain then don't wait.
Who knows what will happen to CGT in two years. At least now you'll be able to dispose for 20% CGT.
In two years it might be 45% CGT. Or you might have an impending IR35 investigation.

Or if you do wait, accept that things will probably change and so will your plans.

If it were me, as I've stated in other posts, I'd keep the company as I wouldn't intend to cease trading completely. But if you're determined to dispose then get it done.

[Maslins]

I think your queries are more one for your accountant than a liquidator. Liquidators will only have very limited knowledge of personal tax, as it's not their role.

Ask your accountant to check re BADR on your wife's shares. I think there are some circumstances where she might still qualify.

If she doesn't, not the end of the world. It doesn't make any difference to the liquidator. They'll do distributions to you/your wife and it's then down to you/your accountant to establish the personal tax position. She'd just potentially pay a higher rate of tax on her distributions than you do on yours.

If you did want to keep the company trickling along, then as others have suggested, not invoicing doesn't necessarily mean the company has ceased to trade. Indeed you can often argue multiple different things for when cessation of trade occurs. Whether this is a good idea or not is another matter. Whilst there's speculation about CGT being clobbered almost every year (and there have been some minor tweaks in the last few years), it does feel more likely it'll get properly clobbered soon. Certailny I can't see the tax rates going down for situations like MVLs of cash rich companies.

[eek]

My goal now is to figure out what to do with my company if I were to take on a permanent role.

Because I gifted my wife 30% of the company earlier this year, my understanding is that she wouldn't qualify for the Business Asset Disposal Relief on her shares until early 2022. Should we wait to start the liquidation process?

MVL Online says this:



I'm trying to figure out if she will "pass" the qualifying period if I were take a permanent position but not make any administrative changes to our company except stopping client work/invoicing.

I will try to reach out to some liquidators to find out.

Just get her to gift the shares back - what's the problem?

[concord]

If she doesn't, not the end of the world. It doesn't make any difference to the liquidator. They'll do distributions to you/your wife and it's then down to you/your accountant to establish the personal tax position. She'd just potentially pay a higher rate of tax on her distributions than you do on yours.

Thank you. I think this has helped clear up my confusion. For some reason I thought that the liquidator dealt with BADR and that any CGT was withheld by the liquidator before transferring the funds.

Just get her to gift the shares back - what's the problem?

I think this perfectly legal but if she wanted to do that, could it seem dodgy or cause potential problems if it was just after one year?

Looking at it from a wholistic family situation, I think she would be okay taking a bigger hit on a smaller portion of the pot for the sake of simplicity. If we went through the MVL process and I qualify for BADR, is it just a case of her paying 20% instead of 10% on her share of the remaining assets? If so, it's easy so calculate the hit.

I will reach out to my accountant and also the lawyer that helped with the share transfer. It sounds like I shouldn't wait on this.