Entrepreneurs Relief And Multiple Companies Question

[iguy2008]

Hi

I have read a lot on this forum about the pros and cons of doing an MVL and the warnings about starting a new company doing the same thing AFTER the old company has been closed down.

A friend of mine has a construction company, and has now setup an additional company (company B) and all future billing will be done via company B. He has been advised by his accountant that he can now shut down company A and take the entrepreneurs releaf (while continuing to manage company B)


I just wondered whats the forums view's are on this and whether it could be done for a contractor company (apologies if this has been covered elsewhere but I haven't seen it).

The key point is that company B is in place and billing before company A performs the MVL.

Thanks - Iguy

[Darren at Fox-Bartfield]

ER

Would need a bit more info. Same industry, same customers, same suppliers, length of time between set up of new company and MVL?

There's a thread earlier on regarding ER and the rules which was discussed at length.

[iguy2008]

Would need a bit more info. Same industry, same customers, same suppliers, length of time between set up of new company and MVL?

There's a thread earlier on regarding ER and the rules which was discussed at length.

Hi

For my friend, it would be the same Industry, existing and new customers, same suppliers and 6 months between setup of company B and MVL


If it was applied to a contractor company, I would say, bill the next contract through the new company.

Thanks - Iguy

[TheCyclingProgrammer]

If anything, IIRC from HMRCs TIS guidance, transferring assets (including trade and goodwill) from one company to another prior to liquidating is even more likely to be caught than the case of starting a second company later.

Remember this isn't just about claiming ER, it's about gaining any tax advantage by taking a capital distribution rather than income and that is possible even without an ER claim.

[Pondlife]

Why has your friend set up a new company that provides the same services to the same clients as their existing one, if not to keep under the VAT threshold or to gain the tax advantages of ER?

[MrMarkyMark]

Why has your friend set up a new company that provides the same services to the same clients as their existing one, if not to keep under the VAT threshold or to gain the tax advantages of ER?

[Darren at Fox-Bartfield]

ER

Why has your friend set up a new company that provides the same services to the same clients as their existing one, if not to keep under the VAT threshold or to gain the tax advantages of ER?

My thoughts exactly. The rules are set up to catch those that are using the legislation to gain a tax advantage. Taking the details we have on face value, that's what it looks like unless there's something else we're missing.

Perhaps your friend could do with his accountant sending through further details to back up his assertion in writing which may demonstrate the reasoning behind his assumptions as being commercial rather than gaining a tax advantage......or the other way round!

[ChimpMaster]

Thought: why didn't he open the new Ltd in his wife's name, assuming he is married. Now I'm not an expert on this and I'm not an accountant (TBH I'm barely an IT specialist now ) but perhaps having a different director and shareholder would allow him to liquidate his original Ltd and then use the wife's Ltd for new business.

Fine line though and not something I would want to get involved with.

[Fred Bloggs]

Why has your friend set up a new company that provides the same services to the same clients as their existing one, if not to keep under the VAT threshold or to gain the tax advantages of ER?

In the building trade it is usually to draw a line under possible liabilities from past work, I believe.

[Fred Bloggs]

Thought: why didn't he open the new Ltd in his wife's name, assuming he is married. Now I'm not an expert on this and I'm not an accountant (TBH I'm barely an IT specialist now ) but perhaps having a different director and shareholder would allow him to liquidate his original Ltd and then use the wife's Ltd for new business.

Fine line though and not something I would want to get involved with.

I can't see that working at all. HMRC look through such contrivances.