LTD lost the biggest client. Thinking of staff cuts.

[garnet]

Hi all,

My situation:
LTD director owning 51% of shares.
employee of the above LTD earning £10 000 per year.

The LTD lost the biggest client hence huge part of the turnover and I might be forced to close it down before and of the LTD's tax year (Nov 2015).

I am thinking to made myself redundant and pay myself redundancy pay of less than £30 000.

Questons:
1. Is the pay expense of the LD? I.e. save on corp tax?
2. Do I have to pay personal income tax on the redundancy payment?
3. Can this be done and will it attract interest from tax man? I.e. effectively I will stop being employed but still a director of the LTD.
4. If business picks up in future can I re-employ myself in the LTD in say different position (by name)?
5. Any suggestions

[malvolio]

Ignoring the sloppy spelling, as a director you're only a employee if you have a written contract of employment, but you can't claim redundancy since your job - being the director - still exists. So Plan A won't work at all.

Plan B is to keep the company running and find new business. Plan C is shut it down, but the other shareholder(s) may have something to say about that, as will HMRC if there are monies owing.

So, perhaps you need to think a little harder about this...

[northernladuk]

I know I will get a slating for churning out the same old comment but you really should speak to your accountant first before starting with a load of ideas that just won't work. He will give you all your options and work out the best route for you. No problems, no stress and best solution. Don't think of the first fudge you can come up with then ask a bunch of strangers if it's the best thing to do for your company.

[garnet]

Ignoring the sloppy spelling, as a director you're only a employee if you have a written contract of employment, but you can't claim redundancy since your job - being the director - still exists. So Plan A won't work at all.

Plan B is to keep the company running and find new business. Plan C is shut it down, but the other shareholder(s) may have something to say about that, as will HMRC if there are monies owing.

So, perhaps you need to think a little harder about this...

Yes, I have contract of employment, so besides a director I am an employee as well with payslips etc. As a director I dont get any payments.
Is being a director a job? Even if so, isnt it possible one to have two positions in a company and one position to be made redundant?
What is the basis of your opinion that this wont work?

@NLUK:will consult my acc/nt after the holidays of course

[Jack Kada]

I know I will get a slating for churning out the same old comment but you really should speak to your accountant first before starting with a load of ideas that just won't work. He will give you all your options and work out the best route for you. No problems, no stress and best solution. Don't think of the first fudge you can come up with then ask a bunch of strangers if it's the best thing to do for your company.

The problem with this sort of advice is that accountants are by and large not really clued up to answer this and push the boundaries on what can and cannot be done

Instead accountants focus on number and balance sheets rather then focusing on devising schemes to make people redundant.

I personally think there are some legs in this proposition

[malvolio]

The problem with this sort of advice is that accountants are by and large not really clued up to answer this and push the boundaries on what can and cannot be done

But with a reasonable grounding in corporate law...

Instead accountants focus on number and balance sheets rather then focusing on devising schemes to make people redundant.

I personally think there are some legs in this proposition

I personally don't, on the not unreasonable basis that his job still exists within the company so there's nothing to be made redundant from. Perhaps he should stick to asking experts who understand taxation law?

[northernladuk]

The problem with this sort of advice is that accountants are by and large not really clued up to answer this and push the boundaries on what can and cannot be done

Instead accountants focus on number and balance sheets rather then focusing on devising schemes to make people redundant.

I personally think there are some legs in this proposition[/QUOTE]

I could maybe kinda see your argument if you are picking any old accountant but if you have done your homework and have picked a contractor specialist he will have been asked this many times over and will be well aware of the right path to take. If you don't think he is then you need to change your accountant.

The other option is some random on a free BB board. I know which way I would be going.....

[psychocandy]

Plan D - Keep the company running, just issue yourself a P45 and then claim JSA. When you get a new contract just employ yourself again.

[tractor]

...

The problem with this sort of advice is that accountants are by and large not really clued up to answer this and push the boundaries on what can and cannot be done

Instead accountants focus on number and balance sheets rather then focusing on devising schemes to make people redundant.

I personally think there are some legs in this proposition

If you read the taxation manuals on the HMRC web site yourself (you and the OP) you will find that this ruse is about as legless as NorthernLadyUK at the office xmas party.

Yes, this idea will gain lots of interest (sic) from the tax man. Probably lots of fines and penalties too upon which you would have to pay more ummmm interest.

[mudskipper]

If you google "sole director redundancy" there's a lot of threads with differing opinions, the consensus seems to be "no, for reasons explained here, but there are a number of opinions suggesting it is possible.

Contractor Doctor: Can I receive a tax-free redundancy payment from my ltd company?

This one's interesting - it looks like someone has successfully claimed redundancy, even when insolvent.

http://www.contractoruk.com/limited_...d_company.html

There are certain benefits for a sole director to be an employee of the company. In the case of Secretary of State for DBERR v Neufeld [2009], the Court of Appeal decided that, on the facts, a director was also an employee and could claim redundancy payment from the Secretary of State under the Employment Rights Act 1996 (s188) when the director's company became insolvent in the same manner as former Woolworths employees.

I think it's more a question for an employment law specialist than for an accountant.