MVL... ER... 2 years

[sfr]

Hello,

Another post about MVL, ER and the 2 year resurrection. I have had a search on the forum and cant find a definitive answer to my query, so can I ask the consensus of the board.

I'm currently staff, and have been made redundant. My last day is 21st December 2018.

Went the MVL route and ER relief to take the staff position. Started staff on 23 Nov 2015. my Ltd co last invoice was July 2015, ceased trading 30 Nov 2015.
Entered MVL on Aug 2016 with an initial distribution. The final distribution was May 2017. Ltd co finally struck off June 2018.

Reasons for the delay was the liquidator wasn't very efficient and lost paperwork etc especially for companies house for final meetings.

So, given the HMRC text is wooly, and I haven't seen anything definitive. When is the 2 years up? Can I become a contractor again without engaging the wrath of HMRC. Or must I find staff until a future date in your opinions. Obviously ltd co closed down as it was no longer needed as I was staff.

I have 'heard' the 2 years starts from ceasing trading, and from entering MVL and from the final distribution. Does anyone have a reasonably clear cut answer?

Your input would be appreciated.

Cheers,

Simon

P.S. my accountant believes the date is from the final distribution.......

[northernladuk]

I'm with your accountant.

[cojak]

Chris from Maslins will be able to give you an answer to this.

[WordIsBond]

Date of distribution. Finance Act 2016

So, May 2017.

I am not an expert but if I understand it correctly, your initial distribution and your final distribution would be treated separately. If it is the date of distribution, and the legislation seems pretty clear on that, then you would be past the two years from that date for your initial distribution but not yet past it for the final distribution. That being the case, I believe you could start a company now, and your initial distribution would be fine, but the final distribution would come under the two years rule.

The fact that you are going back to contracting, not voluntarily but because you were made redundant, could be grounds for arguing that Condition D does not apply (I'm assuming it wasn't voluntary redundancy, if it was this would be harder to argue). You haven't closed and then started again in less than two years to gain a tax advantage, you closed because you went permie and you intended to remain permie. I'd say that the fact that the company ceased trading more than 3 years ago, and that you are only up against the two years because of liquidator inefficiencies would help that argument.

But that's only my opinion and there would be a risk that HMRC would see it differently and you'd have a fight on your hands.

If I am right that the two distributions are treated in isolation of each other, and if the initial distribution was large and the final distribution was small, it may be worth it just to go ahead and form a new company and not claim ER for that final distribution.

Get advice from an expert, but if it were me I'd be asking questions around whether the distributions are treated separately and the first is beyond the two years, and whether they think you have a good case for arguing that Condition D does not apply, since you are only up against the two years because of liquidator inefficiency, and since it is obvious you never intended to come back to contracting.

[Hobosapien]

If it's likely or possible you'll be contracting inside IR35 then continue as an employee (of a brolly) rather than start up a new Ltd. Then if you get a contract 'safely' outside IR35 assess whether worth setting up a new Ltd for it and beyond.

[Maslins]

I'd agree with Word is Bond.

My understanding is each distribution is deemed a separate part disposal for CGT purposes. If one of those is >2 years ago, then it should be safe from the rules. If the other isn't, it may not be.

As WiB says, it may be that you could justify it anyway with the more general circumstances.

I appreciate you may not want to disclose amounts on a public forum, but typically the first distribution would be the lion's share of the funds...so if only the second one is at risk, that may be small enough that it's a risk you're prepared to take.

[WordIsBond]

I appreciate you may not want to disclose amounts on a public forum, but typically the first distribution would be the lion's share of the funds...so if only the second one is at risk, that may be small enough that it's a risk you're prepared to take.

Yeah, that was my thinking, too. I figured it would be a smaller amount and not a big risk. But it's always easier to recommend the other guy take the risks!

In this case I'd guess the risk of him losing would be small even if it were a larger amount. He didn't close his company to gain a tax advantage, and I can't imagine even HMRC trying to argue he did.

[sfr]

Thanks for the replies.

The redundancy is not voluntary or precipitated by any action on my part i.e. misconduct, no.

As for the distribution payments, the first one was in the £000,000s, and the second was in the £0000s. The second distribution will not be subject to tax as my 2017-2018 CGT allowance shall exempt it.

I do have a dormant Ltd co, its been dormant for about 10 years. Reason. My original ltd co was registered in England but I stay in Scotland, so my intention was at some point to close the England co down and use the Scotland registered one. Never got round to it. So this company can be used if needs be.

So I would be safe going under a brolly? As long as I stay an 'employee' I should be safe for the period?

[WordIsBond]

So I would be safe going under a brolly? As long as I stay an 'employee' I should be safe for the period?

Not exactly. You are safe whether under a brolly or not. Your first payment was more than two years ago. You are past the two year threshold on it, whether under a brolly / an employee, or not. If you aren't concerned about tax on the second payment, then you have nothing about which to be concerned.