MVL query

[DDixon]

As a long-time lurker I've been reading about the MVL procedure on here but would like some assistance but please be gentle .

In recent times I have been setting up Plan B and am thinking of going solely down this route and giving up Plan A (Ltd contract work). With this in mind, the MVL procedure is of interest. However, should things go belly up am I able to return to the land of Plan A via an umbrella?

Cheers, D.

[Sockpuppet]

Yes as the umbrella would be your employer like holding any other PAYE job.

[Maslins]

Yes, of course.

Realistically you could also revert to plan A as a Ltd Co contractor. There would need to be some clear separation between Ltd Co 1 & Ltd Co 2 (ie at the very least a few months break, 1st client of Co 2 different to last client of Co 1, use different branding etc).

The thing potentially stopping you closing Co 1 & starting up doing exactly the same thing straight away in Co 2 is the "transactions in securities" rules...but these are there to try to prevent Oldco transferring it's trade and assets (minus cash) to Newco, no break in trade at all, then Oldco is closed down, getting the cash out to shareholders. Debatable to what extent this can really apply to contractors.

[DDixon]

I forgot to ask:

1. Can I keep / will I need repay any dividend I have taken for 2013-14?

2. I assume I will have to 'buy back' any value remaining of company equipment bought - e.g. laptop.



Cheers, D

[Maslins]

I forgot to ask:

1. Can I keep / will I need repay any dividend I have taken for 2013-14?

2. I assume I will have to 'buy back' any value remaining of company equipment bought - e.g. laptop.

1) You can keep.
2) Yes, assuming you want to keep them personally...or sell them on eBay/similar if you don't (either way any sales proceeds belong to the company).

[Craig at Nixon Williams]

2. I assume I will have to 'buy back' any value remaining of company equipment bought - e.g. laptop.

Any non-cash assets can be distributed to you 'in specie' (in their current form) without the need for you to sell them first.

Craig

[DDixon]

Any non-cash assets can be distributed to you 'in specie' (in their current form) without the need for you to sell them first.

Craig

How does that work? I always thought I had to 'buy back' whatever remains of their current value?

[ELBBUBKUNPS]

Yes, of course.

Realistically you could also revert to plan A as a Ltd Co contractor. There would need to be some clear separation between Ltd Co 1 & Ltd Co 2 (ie at the very least a few months break, 1st client of Co 2 different to last client of Co 1, use different branding etc).

The thing potentially stopping you closing Co 1 & starting up doing exactly the same thing straight away in Co 2 is the "transactions in securities" rules...but these are there to try to prevent Oldco transferring it's trade and assets (minus cash) to Newco, no break in trade at all, then Oldco is closed down, getting the cash out to shareholders. Debatable to what extent this can really apply to contractors.

When you say a "few months after" in the case of closing down a previous company using Mvl is this few months from the date the company is fully disolved or from from date it went liquidation ?

thxs

[Craig at Nixon Williams]

How does that work? I always thought I had to 'buy back' whatever remains of their current value?

The asset would be re-valued in your accounts to its market value (what you could sell if for in a transaction made at arms length) then ownership passes to you when the company is liquidated.

The value of the asset is included in the distribution for CGT purposes, therefore you will pay CGT on the value of the asset.

Hope this helps!
Craig

[Maslins]

How does that work? I always thought I had to 'buy back' whatever remains of their current value?

You can distribute them as Craig has suggested. Same way when paying a dividend during trading it doesn't have to be cash, it can be an asset of some sort.

However, same as with dividends, it's easier if you keep CGT distributions to just cash.

When you say a "few months after" in the case of closing down a previous company using Mvl is this few months from the date the company is fully disolved or from from date it went liquidation ?

thxs

There's no set time period, and unfortunately no case law (yet) to help decide. Key risk if you do it straight away is that HMRC argue you continued the same trade, simply transferring the trade from Oldco to Newco.

If there's a very clear break between Oldco ceasing to trade and Newco starting to trade, it's harder for them to argue the trade was transferred.

I would suggest that if there was a specified time period, it'd be from Oldco ceasing to trade to Newco starting to trade.