MVL & Entrepreneur Relief

[fpinela]

I left the UK recently and closed my limited company through an MVL as I would qualify for Entrepreneurs Relief (still running with HMRC as it can take a long time). My intention was to move abroad and either setup a business doing remote work (Software Developer) from my new country or even get a permanent job. A couple of days ago an old client (had a contract with them about 4 years ago) of mine got in touch asking if I was available for a contract and I explained that I was no longer living in the UK and would only be considering fully remote positions (after New Years anyway). To my surprise they have come back now and are happy to have me working remotely full time.

My question is, could this be an issue in terms of Entrepreneurs Relief? There was obviously no intention to close down my Ltd for tax avoidance, it was done because I moved out of the country but could the fact that we had a contract before be an issue here?

Many thanks

[jamesbrown]

Yes, definitely on shaky ground, especially if you’ve been continuing the same or similar trade or activity in the intervening period (overseas). If you’d moved overseas to do something completely different and your circumstances then changed, you might have a case (I.e. even within the 2yr period in the TAAR). Incidentally, your problem has nothing to do with ER, but the TAAR in the TiS legislation that governs a capital distribution. Best to get legal advice, as this is a somewhat complex area, but you may be in breach of the TAAR already if you simply planned to conduct the same trade or activity overseas.

[northernladuk]

My question is, could this be an issue in terms of Entrepreneurs Relief? There was obviously no intention to close down my Ltd for tax avoidance, it was done because I moved out of the country but could the fact that we had a contract before be an issue here?

Many thanks

The only thing you have to worry about is the new rules around Transactions In Securities. They've put a 2 year limit on shutting a company down to claim the relief and starting a new one.

The fact you've had a contract with your client before is irrelevant. It's all about how you intend to do business with your (and any client).

More information here..

Transactions in securities

and a blog from Chris here

Changes to tax on MVLs overstated | Chris Maslin's blog

[Maslins]

If you'd be doing the new contract via some kind of trading entity in the country you now live, personally I'd have thought that's a pretty good argument. Ie yes you may be doing very similar trade, within 2 years...but you used to live in the UK and had a UK Ltd Co, now you live overseas and have an overseas Ltd Co (or equivalent). To me that would seem a sufficient change to argue tax wasn't the primary motivator.

If you set up a new UK Ltd Co to run remotely from overseas then I'd suggest it's more at risk...as then the question would be why not keep the old Ltd Co. Of course you'd argue at the time of closing you didn't anticipate the new contract...but to me it's a more questionable argument than in my first paragraph.

[fpinela]

Thanks, really appreciate all the replies.

Just to give a bit more information, my Ltd co in the UK ceased to trade in Aug, 31. I have been travelling through Europe since September and have settle down in Portugal now. My original intention was to focus on a personal project for the next couple of years but that is not going exactly as expected so I am considering either a permanent position here or work as a self employed / Lda (same concept as a uk Ltd). The work will be carried out from Portugal and I don't have any intention to setup a ltd co or use an umbrella, that is out of question.

[jamesbrown]

If you carry on the same or a similar trade or activity within a 2yr period of your last distribution, you're essentially "at risk", because you need to show that avoidance was not a primary motivation. But that risk could be small if you can document your intentions clearly (as not being related to avoidance). Providing you can do that, the risk should be small-ish (but not sufficiently tested to be definitive). For example, if you started a permie job overseas and subsequently lost that job, you should not be at significant risk. This is a situation where details matter and where there is some uncertainty. Still, if you can honestly answer the question to yourself "was I really looking to avoid dividend tax?" with an emphatic "no", then there's a decent chance you're OK, providing you can evidence that.