Most tax efficent Way of closing a LTD company...

JackRussell

There are plenty of threads here I've read through, non of which fit my current circumstance so thought I'd post to see if anyone had any advice specific to me.

• I have my own LTD company found in 2007 (ish) and lists me as the single share holder.
• Currently it has approx £160k in cash
• owes about £250 (to Google of all people).
• I also have VAT and Corporation tax liabilites - probably around the £3k region.
• I am also employed fulltime (not contractor) earning around £40kpa
• Assets, such as web domain names, are probably worth a further £10k in total.

In the past I've taken odd dividends, but now want to close the company, hang up my internet boots and make the most of the cash by either investing it (not in a pension) or paying off our mortgage.

I read a lot about MVL, making the most of Capital Gains Tax and also Entrepreneurs’ Relief but can't fathom out how it would apply to me based on me also being employed. Anyone any ideas?

kidmugsy

JackRussell wrote: »

Anyone any ideas?

Find an accountant with experience in this area.

polymaff

Take a look at:

http://www.accountingweb.co.uk/article/companies-house-accelerating-strike-offs/597754

Some food for thought in the comments.

Pennywise

JackRussell wrote: »

I read a lot about MVL, making the most of Capital Gains Tax and also Entrepreneurs’ Relief but can't fathom out how it would apply to me based on me also being employed.

Your other employment status shouldn't have any effect at all. As long as your limited company is currently and has always been a trading company and the funds have been generated from it's trading (rather than investments etc), you should be able to go down the MVL route and claim entreprenneurs relief. It's capital gains tax so nothing at all to do with your employment which is subject to income tax.

What has your accountant advised?

JackRussell

Thanks Pennywise.

Ltd has and is currently trading and all money generated in usual trading manner - not investments etc. Not yet spoken to my accountant but suspect he will advise pension as being the best route. For arguments sake, based on £150k, what type of figure could I expect to walk away with?

TheCyclingProgrammer

Speak to your accountant as pension contributions could be an option but if you want the cash now a MVL - assuming you're eligible for ER (sounds like you should be) - would be the most efficient I'm sure.

You can do a simple MVL for around £1000-1500 now. Set aside about £5-6k to cover your outstanding debts, MVL fees and any final accountancy fees. If you're not quite over the higher rate threshold you could declare a small final dividend to take you up to it (get this done before the end of this tax year to avoid the new dividend tax rates!). This would probably leave you with just over £150k or so. The first £11.1k will be tax free (your CGT allowance assuming you have no other chargeable gains), the remaining will be taxed at 10% with ER, you'd take home about £136k.

As I said I'm not certain about how the assets are dealt with but I imagine these would be treated as part of the capital distribution so you may also be liable to CGT on their value which may knock a grand off.

JackRussell

Fantasitc. Thanks very much for the break down. Ideally I wanted to know whether the figure would be enough to clear the mortgage, which it would be. Appreciate there may be slight +/- but if it doesnt quite clear the mortgage, it will certainly reduce it to pretty much zero.

Thanks again for the replies. Time to enjoy a holiday and when I get back, focus on selling old domain names and shutting down the company. It served its purpose

redmalc

you need to move pretty quickly because the government are closing the door on a number of tax benefits an MVL will give you

Pennywise

redmalc wrote: »

you need to move pretty quickly because the government are closing the door on a number of tax benefits an MVL will give you

Any proof or links of that? What are these "a number of changes"?

There's certainly been a bit of hot air in the media about things the Chancellor "may" do in next week's budget, but as far as I'm concerned, nothing new has yet been announced. Even if you started down the MVL route today, there's no way you'd have made enough progress to protect yourself against anything new that's announced next week.

I have noted that a number of liquidation firms promoting MVLs have been heavily suggesting that changes are imminent but I think that's more of a marketing ploy to pressurise people into signing up for their services.

TheCyclingProgrammer

redmalc wrote: »

you need to move pretty quickly because the government are closing the door on a number of tax benefits an MVL will give you

Not true. The government are tightening the existing rules (Transactions in Securities legislation) as well as introducing a targeted anti-avoiding rule that targets those who take advantage of an MVL to extract capital at the 10% ER rate only to start up a new business and continue trading again (often referred to as, albeit slightly inaccurately, phoenixing).

The new targeted rule will mean ER is not an option if you plan to continue doing the same trade or activity within 2 years of shutting down your company however the rule changes are somewhat ambiguous, were open to consultation and still haven't been confirmed yet (probably in the budget).

Those who are eligible to ER and plan to do a normal MVL and stop trading are not affected.