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Entreprenurs relief

Post dissolving your company

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I have a client who is a one man limited company. They are looking to dissolve the company and claim the Entrepreneurs relief, which is fine.

However am I right in saying they can not open up another limited company under their name for another two years?

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By Duggimon
02nd Apr 2020 16:18

No, that's not right. They can open up another limited company any time they want to. If the limited company is doing broadly the same thing as the one that just closed, they will have to pay the additional tax that would have been owed had the winding up of the company been treated as an income distribution.

If the company is doing something else, or if they don't mind paying the additional tax, they can go ahead and start it up the next day.

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By Matrix
02nd Apr 2020 16:33

Assuming that a formal winding up was required.

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By insolventnl
02nd Apr 2020 18:50

What if they do the same trade but change from a limited company to a sole trader.

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By Matrix
02nd Apr 2020 19:15

How are they dissolving the company? Did you see my reply and have you read the anti avoidance rules?

If they are dissolving without an MVL then why do you think they are caught?

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By Tax Dragon
03rd Apr 2020 06:39

Matrix wrote:

If they are dissolving without an MVL then why do you think they are caught?

Because the company is being wound up. Why do you think they are not caught?

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By Matrix
03rd Apr 2020 07:11

The OP uses the word dissolved, not wound up.

The anti avoidance rules in s396B refer to a winding up. So the OP needs to clarify.

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By Tax Dragon
03rd Apr 2020 08:14

Well, the shareholder wants the assets. Why else would ER be in point?

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By Matrix
03rd Apr 2020 08:31

If the assets are less than £25k then a dissolution can take place and achieve capital treatment without a winding up. Or do you think this is also caught? I had understood that a winding up was a formal liquidation for the purpose of the anti avoidance rules.

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By Tax Dragon
03rd Apr 2020 08:55

OK I take your point. Though on those sums, especially at the start of a new corona-affected tax year, I might actually prefer income treatment.

It's not something I have looked into, as none of our clients would do this, but I remember Justin getting apoplectic about HMRC saying the TAAR caught the scheme whereby the company was sold to a third party (which promptly stripped it and closed it), the original shareholder then starting the trade up again in a new vehicle. IIRC, HMRC said something like "if the TAAR don't get you, the GAAR will".

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By SteveHa
03rd Apr 2020 09:10

Tax Dragon wrote:

HMRC said something like "if the TAAR don't get you, the GAAR will".

Which is a view I agree with in the circumstances.

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