I am considering closing down my Limited Company and understand possibly the most efficient way to take existing funds from the company is via Members Voluntary Liquidation. But how long after closing a Limited Company using this method can a contractor start working as a different Limited Company again?
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There's no time constraint per se, it's about intent. You should not be closing the company with a view to conducting the same trade through a phoenix company, i.e. simply to gain a tax advantage. In other words, if you have a good reason for closing the company (e.g. becoming a permie) and a good reason for opening another company in the same trade shortly thereafter (e.g. permie job didn't work out), the precise length of time doesn't matter.Originally posted by Bojangle43 View Post -
I am currently registered for VAT as offering "Business Services". I will be starting a new contract later this year offering "Management Consultancy". So I am proposing closing down the "Business Services" limited company and starting a new contract through my "Management Consultancy" limited company. Can you see any issues with this?Comment
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What sort of services are/were you offering? What are you doing in mean time? How different are thwy from the intended new venture?
What you describe has a pretty wide remit and an inspector may take the view it is a continuation of the same trade.
You know whether it is really the same trade or not.
there are consequences if hmrc notice and disagree with you.Comment
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Can you answer following the question honestly with "yes"?
I am intending to close down those company and start a new one for commercial reasons rather than gain a tax advantage?Comment
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If you were heading into a quite different line of business then it wouldn't be a hard one to justify, say away from IT contract services into servicing cars.
Management Consultancy can very easily be described as a Business Service by anyone with a reasonable grasp of English. If HMRC catch you doing this and decide to go after you in court how do you think you can sensibly defend it?
True odds are they won't catch you at it, but if they do then you will richly deserve the slapping and misery they dish out to you as frankly it smells of a tax reduction scam you're trying to pull.Comment
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Yes, the question would definitely have to be focused on tax as a motivation.Originally posted by Alan @ BroomeAffinity View Post
To the OP: FWIW, I wouldn't sail too close to the wind on this one, as it's untested in the courts, so there will be a degree of uncertainty in any advice you receive. The legislation you're looking for is Transactions in Securities (TIS), updated in 2010. My instinct is that you're playing silly buggers, because you could probably (quite reasonably) offer services in "Management Consultancy" through your existing company. The question is: why wouldn't you?Comment
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I know of at least one CA firm up here who's main thrust of advice is to close down one co via MVL and open up another more or less immediately every 3 or so years. I haven't managed to figure out the angle but it seems an exercise in insanity to me.Comment
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@the OP my view is in line with others I'm afraid. Is there any non-tax motivated reason for the closure?
@Alan I know a few firms who recommend that, indeed have done for over a decade (so nothing to do with ESC C16 changes). My understanding is it's less about the benefit of CGT treatment on close down, more about minimising exposure to IR35. Obviously a questionable tactic...but theory is it means HMRC can only ever go back a couple of years with any IR35 claim, so risk is reduced.Comment
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If I was a cowboy, I would say go for it.... it's untested in the courts...
You probably have a better chance of being struck by lightening twice than having HMRC go after you as the first ever case of someone being accused of gaining a tax advantage via a MVL.
But I'm not a cowboy, so it's up to you.Comment
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