Setting up 2nd Limited Company for IT Contractor?

lcbjcomc

Hi

I have been an IT contractor for the last 7 years and at the beginning of July I took on a permanent job. I have decided after 3 weeks that it isn't for me and have been offered another contract back where I left.

To the end of my last company year I had an outstanding directors Loan of £9k. This is mainly due to taking more money out of the business than I was entitled to when I was off having my baby. All taxes are up to date and I have a plan to pay my corporation tax bill by January 2012. The plan was to then shut my company down

I think I would like to set up a new company so I can start with a totally clean slate in this new contract.

Is there anything stopping me doing this?

Horace

Why close the current one down only to set up another doing the exact same thing? It doesnt make sense to me. Why not keep the current one open and pay off your Directors Loan?

I think if you close one down and open up the exact same thing using a slightly different name makes you look dodgy IYSWIM?

paddyrg

As above. It's a "close company", you may as well keep the old one open and save all the grief of closing and opening. It's not as if the company name is different/sullied/wonderful and going to make any real difference in any meaningful way.

steve1980

But it would wipe out the loan....which I suspect is why the OP is asking.

Horace

I dare say but debts of any kind have a nasty way of creeping up on you.

If you keep opening and closing companies because you keep taking out loans, then you could end up being struck off by Companies House and not being allowed to be a Director.

Personally, I would pay back the loan and use an accountant to keep an eye on the finances.

InsideInsurance

Ignoring the loan issue, there can be benefits of starting a new company in terms of getting the year 1 discount on flat rate VAT which I assume you use like most contractors, reduced chances of HMRC investigation etc. Certainly the last programme manager I worked with who was also a qualified accountant used to switch companies every 2 years.

That said there are also disadvantages in terms of loss of credit/ trading history for any future credit you or the business may want

ESKIMO

Isn't there a big risk of becoming a Disqualified Director doing that? Sounds like a sure fire way of achieving that and that is one long road noone should go down. The fact that you still have loan outstanding but just don't want to pay it? Like Horace said, it could come back to haunt you.

Think of all the rogue traders that do this and try to confuse people by changing their names back and forth upteen dozen times and eventually going on the run!

lcbjcomc

I honestly don't want to get out of paying anything I owe. What I don't understand though is I have a Directors loan of £9k as at the company year end and a Corporation Tax bill of £5k. All other taxes (PAYE & NI, VAT) are paid.

I would assume that the amount of the Directors loan should equal the outstanding liabilities? I don't understand what I am missing as to why there is a £4k difference (this could quite possibly be my being naive when it comes to taxes & accountancy). I have asked this question of my accountant but he had left for the weekend so will await his reply on Monday.