Being a director again after an MVL?

What are the tax implications of becoming a director again within 2 yrs

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I liquidated my company through an accredited liquidator a year ago, company was solvent, just didn't forsee the need to use the company again, it started about a year ago and has all been complete and on companies house.

The money from said company is now in my savings account where I was planning on using the Business asset relief (former entrepeneurs relief) and paying tax on 10% of the money withdrawn, as opposed to a higher dividend amount, this will be for this financial year ending April, so Payable Jan 25 time.

Now a former client has begged me to come back for a project, I have 3 options

1. Start a new company, If I do this can I basically declare the money withdrawn from former company as a Dividend, and pay the full tax on it, regalrdless of me using a liquidator, and not claim the Business asset relief. If this is the case can I use the MVL process after the 2yr period again, which would be next summer for new company?

2. Operate via a umbrella company - And just pay the higher rate of tax, and keep the previous money form former company and pay the 10% only on it still.

3. Still pay the 10% on the former money, and just operate as a director again, I have another income stream so will not be withdrawing a salary from it, but I know after an MVL you are not supposed to operate as a director again, I guess this is a risk and just wondering how clued up HMRC are, and if they come at me later down the line, what are the implications of doing this?

Thanks

 

Replies (14)

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paddle steamer
By DJKL
20th Feb 2024 13:20

I think you are mixing up director disqualification and starting up within two years re tax treatment. I would visit an accountant.

Thanks (1)
Replying to DJKL:
By Ruddles
20th Feb 2024 13:23

I think he is mixing up a whole load of stuff. Definitely time to speak to a tax adviser.

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Stepurhan
By stepurhan
20th Feb 2024 13:39

You forgot option 4. Tell the former client you have retired and they will have to find someone else for their project.

That would solve all your tax worries at a stroke.

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stonks
By WinterDragon
20th Feb 2024 13:41

Matc wrote:

3. Still pay the 10% on the former money, and just operate as a director again, I have another income stream so will not be withdrawing a salary from it, but I know after an MVL you are not supposed to operate as a director again, I guess this is a risk and just wondering how clued up HMRC are, and if they come at me later down the line, what are the implications of doing this?

 

Would you walk into a conversation with a criminal lawyer and ask them that you know you're not supposed to rob a bank but you've heard the police are stretched thin and response times have slowed down so what are the odds of getting away with it?

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By nrw2
20th Feb 2024 13:48

Becoming an employee of the client could work, your accountant will be able to advise.

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By Leywood
20th Feb 2024 14:34

You seriously want us to comment favourably on your suggestion to commit fraud?

This forum isn’t a tax/accountancy helpline

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DougScott
By Dougscott
20th Feb 2024 16:00

Do we now have to report the OP?

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Replying to Dougscott:
RLI
By lionofludesch
20th Feb 2024 18:33

Dougscott wrote:

Do we now have to report the OP?

Report what ? Asking for an opinion ?

OP - why do you need to form a company ? What's this project you've been offered ? How different is it to the work you did before ? Why can't you work as an employee ?

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By Matrix
20th Feb 2024 20:22

4. Give all the facts to a tax adviser including the dates of the distributions by the liquidator and your intentions when appointing a liquidator so they can give you a written opinion on the application of the anti-avoidance rules. There is insufficient information to suggest that they would definitely apply, there are certain tests.

You are confusing two different 2 year rules by the way.

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By Matc
20th Feb 2024 20:39

Thanks for the responses, of course I am looking for the most tax efficient way to operate, I have spoken to my accountant previously and he has explained the anti phoneixing rules and how they will most likely impact me.

I could go via umbrella and just take the tax hit, this income would all be taxed at the additional rate, I could max out my pension contributions of course which would make sense via this manner.

Ultimately I would have never liquidated the company, but hindsight is a wonderful thing.

If I do operate as a director again I will probably just pay the tax hit, and then use the MVL option again after the 2yr period of the previous company being liquidated expires, I can leave the money in there until that time, but if course I'll be running all this past my accountant

Thanks (2)
Replying to Matc:
By Ruddles
20th Feb 2024 20:56

It sounds as though you need to either ask your accountant to explain it all again or find a new accountant that knows what he’s talking about, as your analysis is still flawed.

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Replying to Matc:
RLI
By lionofludesch
20th Feb 2024 22:26

Matc wrote:

Thanks for the responses, of course I am looking for the most tax efficient way to operate, I have spoken to my accountant previously and he has explained the anti phoneixing rules and how they will most likely impact me.

I could go via umbrella and just take the tax hit, this income would all be taxed at the additional rate, I could max out my pension contributions of course which would make sense via this manner.

Ultimately I would have never liquidated the company, but hindsight is a wonderful thing.

If I do operate as a director again I will probably just pay the tax hit, and then use the MVL option again after the 2yr period of the previous company being liquidated expires, I can leave the money in there until that time, but if course I'll be running all this past my accountant

Was the main purpose of liquidation to avoid income tax? Or was it to retire?

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Replying to lionofludesch:
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By Matc
20th Feb 2024 22:56

Due to IR35 reform, and the work I do, the vast majority of it these days is now deemed inside IR35, and taxed at source through umbrella companies, so made no sense to leave the money sat there, when i could extract it using the most efficient manor, and pay a lump sum of the mortgage off with interest rates going up.

Thanks (1)
Replying to Matc:
RLI
By lionofludesch
20th Feb 2024 23:09

Well, it's your privelege to be coy with your personal information on a public forum, if that's what you wish. But if you avoid direct questions, you can only expect limited help from here.

Your best option is to seek bespoke professional advice.

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