Most tax efficient way to take £100k from post tax company savings

[twiz911]

Hi

I'm the sole director of a UK limited company which I mostly usED to invoice clients as an IT contractor although it has a small ongoing income from private clients.

I have 100k in "post tax savings" built up in the company's savings account and would like to pay this to myself in a lump sum and wish to know the most tax efficient way of doing this.

I've emigrated to Australia and no longer doing UK IT consultancy so closing the company is an option (although not ideal).

Any advice much appreciated.

Thanks for reading.

[northernladuk]

How about a bit of basic research and asking a professional like an accountant?

[Wanderer]

I've emigrated to Australia and no longer doing UK IT consultancy so closing the company is an option (although not ideal).

Difficult to say since you are probably not tax resident in the UK any more. Do a search for "Members Voluntary Liquidation" which allows you to take the money as a capital gain and pay a lot less tax. However it also means you have to close the company and stop doing business in the UK.

It's complicated, you need to speak to a tax advisor in the UK about doing an MVL and also in Australia to understand what the impact of the capital gain would be.

[Clare@InTouch]

Just to echo the good advice given by Wanderer and NLUK above - you need to know the UK tax implications and the Australian tax implications before you decide. What's good here may be terrible there or vice versa.

You may wish to consider closing the company whilst it's still deemed a trading company, rather than waiting until the point it's deemed to be an investment company. That makes a difference in the UK so it probably does in Aus too.

[Greg@CapitalCity]

I think the main issue here will be the tax implications in Australia. If you permanently left the UK before 05 April, then any dividends you pay yourself now will not be UK-taxable. If you left the UK after 05 April then a bit more UK tax planning would be required.

To determine if a Members Voluntary Liquidation will be useful we would need to know how long you lived in the UK previously, the date you permanently left the UK, and knowledge of any plans to return to the UK. This might help your UK tax position (again, only relevant if you left after 05 April 2013), but your liability to Aus tax is another matter and one you will need to take up with an Aus accountant.

Usually the best approach is to take all earnings from your company before leaving the UK (to ensure it remains taxable in the UK and not taxable in the country you move to) - because this hasn't been done you'll need to spend some time researching the tax implications in Australia.

[twiz911]

Hi Greg, Clare and everyone,

Thanks everyone for their replies.

I do have a UK accountant - but he is not able to advise me - I've asked.

Yes my UK company is still a trading company, and still trading small amounts.

I'm still registered as a UK tax payer (I'm also registered UK self employed) and I've not completed the P85 form to say I've left the UK (should I have?)

I actually left the UK in May 2012 on a "working holiday visa" but since got permanent residency in Australia as a self sponsored "skilled migrant" - good old IT skills!

I lived in the UK 31 years before that. I don't plan to go back anytime soon and can stay in Australia indefinitely (Melbourne's great!).

I'm happy to close the company if this is the most tax efficient way to extract money? How do I go about this?

Many thanks

[Nathan SJD Accountancy]

Hi,

My advice would be to approach an accountant either in Australia or approach one in the UK that has a presence, knowledge or contacts of Australian taxes. Then you can tell them your situation in detail and they can either liaise with each other (if you need more than one accountant) to ensure that you pay no more tax than you have to.

[Maslins]

As others have said, check up on any potential Australian personal tax impact.

If there is none/it's not penal, then getting an MVL (Members Voluntary Liquidation) is probably your best bet.

If it looks like you would get stung in Aus for CGT, and the rates aren't friendly, ask your Aus accountant what would be the best way to get the funds.

[Greg@CapitalCity]

Hi twiz911,

I am afraid you are going to need to speak with a decent tax accountant in Melbourne - there is such a flow of people between UK and Aus I am sure you will be able to find one that knows what he is doing. From the UK side the two usual options when closing are;
(1) Take all funds out as a dividend. From a UK tax perspective these dividends are not taxable (regardless of you being registered for UK tax, based on what you have said, you are not tax resident of the UK so you would not put those dividends on your UK tax return;
(2) For £100k of retained earnings, doing an MVL would be the usual route. It makes no difference from the UK side though - the capital gain or dividend (from 1 above) are not taxable in the UK - however the final distribution from a liquidation might not be taxed as capital in Aus - you will need to find this out;

A couple more things to think about;
(a) Check the new statutory residence test to ensure you are not UK tax resident;
(b) If your company is still trading, its effective centre of management will be Australia making the company Australian tax resident. This means it needs to register for company tax in Australia.....a scenario best avoided so close the company as soon as you can;
(c) Yep, get that P85 submitted;

Hope that helps!