Closing company due to current climate...

[zippy.mini]

Hi All

I've just finished a contract and am undecided about going back out there at the moment, this may be my last contract, but it may not! I'm going to see if I can get a plan B type business going instead, but if someone offers me something on a plate, I will almost certainly take it.

However, all this talk recently of HMRC going after PSCs, the business entity tests etc, the letters going out.... It all worries me somewhat. I'm not sure that it should, but it does. So I'm planning to close my company now.

This does save me money in tax because I've been one of those contractors that stays below the 40% tax bracket and left the cash in the co, rather than paying 25% divi tax on it. I was always planning on closing and taking it out using ESC16 but as that's been changed now, I will liquidate, still using entreprenuers relief as well.

Trouble is, I'm having last minute second thoughts. I can see myself taking another contract at some point. I was planning on going Umbrella if that happened as the stuff mentioned above has me running scared. I'm not sure I should be though and the thought of paying all that PAYE tax is a horrible one ! I am a member of PCG, I have TLC35 insurance, I have all my contracts reviewed, I have insurances etc etc. But I do come out as high risk on the Business Entity tests and I really don't want the hassle of investigation.

Is there any problem with me closing my company down now and then opening another in a few months' time if I go and get myself another contract? I probably wouldn't be able to use entrepreneurs relief to close the second company I guess? Or has that limitation gone now? (You used to not be able to get ER on a company in the same business as your last one, as you were only entitled to it if you had no intention of going back to it - is that still the case now?)

I don't know, I have the choice of taking the money out as dividends and leaving the company dormant but that costs a few thousand more in tax than the liquidation route. I think closing it now is a good idea, putting it all to bed so to speak. Maybe I should just do it and then work out what I should do if and when I get another contract...

Sorry for the waffle. Thanks, if you got this far!

[Hex]

I'm thinking among similar lines. I don't see there's any problem closing the company down if you have no current contracts and you don't know whether you'll ever contract again. Seems reasonable to close it down to get rid of the admin of it. If the situation changes in 6 months time and you find you need a company again - open another.

[zippy.mini]

I'm thinking among similar lines. I don't see there's any problem closing the company down if you have no current contracts and you don't know whether you'll ever contract again. Seems reasonable to close it down to get rid of the admin of it. If the situation changes in 6 months time and you find you need a company again - open another.

Thanks Hex

[Hex]

Have a good chat with your accountant on the best way to do it. You can only take out up to 25K now as a Capital Gain when you close it yourself. You can take out more if you do an MVL I think. It may be worth your while leaving the company open until April next year so you can use another year's personal allowance on Dividends.

It depends on your exact situation - so do talk to an accountant.

[BolshieBastard]

Rather than close it down, have you considered making it dormant? That way you have a ready made company if you decide to get another contract or alternatively, close it down for good once you've reached a firm decision on what to do.