Return to permy and leave company running?

[jolly fellopian]

Hi,

I'm making a career change that means I will return to permanent employment. Currently I am director of my contractor ltd company that I take dividends and a regular PAYE salary from. It's being run cheaply (I run my own accounts via FreeAgent), and it has enough funds to operated without income (be steadily drained of cash) for another two years or so. I'm happy to leave it running rather than take entrepreneurs relief and closing, as I don't need all the cash in a lump-sum urgently this also gives me the flexibility to contract using the same company in my new career direction if I choose to in future.

My question: when I start a new permy job, must I stop taking salary? Will HMRC take a dim view of my being in legitimate business if I have two salaried jobs? Should I leave it running and only take dividends as a shareholder (not PAYE as an employee)? I assume there's no problem with just being a shareholder.

Many thanks.

[TheCyclingProgrammer]

Its entirely up to you but if you have a permanent salary elsewhere I can think of no good reason to keep taking a salary from YourCo. Just take dividends as and when you need them.

[northernladuk]

Why would you take a salary? You are going to get stung on tax what with your perm salary. Just drip feed the dividends.

Normally i'd say you need to speak to an accountant and do some proper tax planning but im guessing you dont have one.

[Maslins]

Generally speaking it'd make sense to stop taking the salary from your own Ltd Co. Main reason most contractors take a little salary is because they don't have significant independent earnings elsewhere, so it is both a valid business expense for the company (reducing corporation tax) and also tax free for them (as below personal allowance, and often NIC thresholds). Where you've got a permie role elsewhere in the same tax year, continuing to take a salary from your own Ltd Co would no longer be tax free.

If the remaining net assets of the company are modest and accounting costs/hassle low, then drip feeding dividends (potentially below £5k allowance) over a few tax years may be your best option. This also gives you the flexibility to easily return to it if the permie role doesn't work out. Also potentially worth considering making a chunky pension contribution. Otherwise, closing's your main option, with potential CGT/entrepreneurs relief etc.

[VectraMan]

WTS. Deregister YourCo. from PAYE and VAT and just pay dividends when it suits you. You can start those things up again easily enough if you go contracting in future.

[jolly fellopian]

WTS. Deregister YourCo. from PAYE and VAT and just pay dividends when it suits you. You can start those things up again easily enough if you go contracting in future.

Re VAT, I'm on flat-rate now. No sense being on the flat rate scheme if company has no income, so I can understand switching to standard (Cash Accounting). But what is the benefit from de-registering from VAT & PAYE completely? Is it just less admin, or are there financial benefits? Thanks all, very helpful.

[TheCyclingProgrammer]

Re VAT, I'm on flat-rate now. No sense being on the flat rate scheme if company has no income, so I can understand switching to standard (Cash Accounting). But what is the benefit from de-registering from VAT & PAYE completely? Is it just less admin, or are there financial benefits? Thanks all, very helpful.

Less admin and lower costs if you pay somebody to do the admin.

[craigy1874]

Also, there will be no corporation tax relief on the salary you draw from the limited company if it is paid in a non-trading/dormant period.

So you would pay tax on it and the company wouldn't save tax.

Therefore, it is a terrible idea.