From Ltd to Umbrella

[Diestl]

Hi,

I have been contracting through my Ltd Co for 2 years, but I want to move to umbrella and close down the Ltd company. I have outstanding corp tax (and VAT etc), and have not paid these yet even though they were due a few months ago. Whats the procedure, can I just switch mid contract and then wind down or bankrupt the company? If I liquidate it can I avoid the corp tax etc?

[Turion]

Hi,

I have been contracting through my Ltd Co for 2 years, but I want to move to umbrella and close down the Ltd company. I have outstanding corp tax (and VAT etc), and have not paid these yet even though they were due a few months ago. Whats the procedure, can I just switch mid contract and then wind down or bankrupt the company? If I liquidate it can I avoid the corp tax etc?

HMRC won't let you close until everything is paid up. You're a director, you have legal responsibilities and could be bankrupted and banned from being a director again if you are deemed to have acted irresponsibly.

[Diestl]

HMRC won't let you close until everything is paid up. You're a director, you have legal responsibilities and could be bankrupted and banned from being a director again if you are deemed to have acted irresponsibly.

I won't be opening a company again, also as its a Ltd I have no liability for the company debts etc. Or does that not apply to tax?

[sweetandsour]

I won't be opening a company again, also as its a Ltd I have no liability for the company debts etc. Or does that not apply to tax?

As a shareholder you have no liability for company debts.

As a director you are required to operate the company within the law. This would be where you might come unstuck.

[tino]

Hi,

I have been contracting through my Ltd Co for 2 years, but I want to move to umbrella and close down the Ltd company. I have outstanding corp tax (and VAT etc), and have not paid these yet even though they were due a few months ago. Whats the procedure, can I just switch mid contract and then wind down or bankrupt the company? If I liquidate it can I avoid the corp tax etc?

You're playing with fire here

[NotAllThere]

As a shareholder you have no liability for company debts.

As a director you are required to operate the company within the law. This would be where you might come unstuck.

And as a director you can be prosecuted for tax evasion.

[Cameron Wallace]

a friend of mine tried this and the advice he got from his accountant was that if the HMRC have deemed that you have acted fraudulently then you will be liable for the outstanding and fines (at least).

[PhilAtBFCA]

Regulation 72(5)

Diestl

This article might interest you it is about how HMRC can hold you personally liable as an employee or director who has received income from which PAYE should have been deducted.

If you are not declaring and paying company taxes - it is scary stuff. If you are then it is no problem.

The article is particularly relevant to being found to be inside IR35 and closing a company or having a company with no funds in it to pay the paye owed.

Phil

[gingerjedi]

I'm thinking of closing my Ltd and going brolly too, though I'll be doing it all above board.

Rates have fallen off a cliff so I see no advantage of running a Ltd when I can't get anything above £20 ph, the more you earn the more Ltd is worthwhile but it just doesn't seem worth it anymore.

[PhilAtBFCA]

Ltd Or Umbrella

gingerjedi

I can understand how it feels when rates drop and it doesnt seem worth it, but for the sake of balance I would like to mention five things :-

1. As a ltd co - you will always be financially better off than an Umbrella both inside or outside ir35 - Its a mathamatical certainty assuming - a) your vat registered b) expenses are the same between both ( the legislation is the same so they should be ).
2. Its not just about the money - In todays regulatory environment to run a ltd co you really have to want to run your own business.
3. It will cost you money to close the company, and at the same time you will be paying for an Umbrella Service - is that not two fees ?
4. The difference between Umbrella and Ltd may not be worth it for you, but it may be worth it for soemone else, we just do the numbers !
5. Accountancy fees can be less than an Umbrella - people do not expect that in general, but it is true.

There is a spreadsheet calculator and video here which means you can test the numbers just by entering Contract Rate and Expenses. ( You do not need to give any details to download the spreadsheet ).

Phil