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List of things accountant must do before MVL

Check list for an accountant before starting MVL.

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Hello Going for MVL and need to understand what are the specific actions that need to be done for my Ltd company before starting MVL? I have diregisteted all schemes, have paid creditors and settled everything apart from corporation tax. Need to sumbit corporation tax return but not sure how I do it as my accounting period did not finish yet. .. How do I inform hmrc etc Many thanks for any guidance.

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By Matrix
01st Jun 2021 23:09

The company’s accounting period for corporation tax purposes ends when the company ceases to trade so draw up the CT600 to this date. Or discuss with the IP since surely you are paying them and they will have to deal with HMRC and file a final return anyway?

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Replying to Matrix:
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By naty1975
02nd Jun 2021 11:26

My mvl company told me I have to have my corporation tax filed and paid before starting to work with them. They are not doing accounting for me. They only reach out to hmrc for confirmations after that I don't own anything

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Replying to naty1975:
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By Paul Crowley
02nd Jun 2021 14:40

Sounds like cheap on line people appointed
You get what you pay for

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By Andy556
01st Jun 2021 23:13

The IP should give you all the advice you need. If they don't, get a new IP

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Replying to Andy556:
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By frankfx
01st Jun 2021 23:28

Andy556 wrote:

The IP should give you all the advice you need. If they don't, get a new IP

Agree.

Indeed when you appointed/ approached the IP they would have offered some hand holding as part of their enticing and excellent service. Yes?

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Replying to frankfx:
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By naty1975
02nd Jun 2021 11:23

Have 35k in reserves. My mvl agency charges me 3k but it is not going to do accounting for me. They sent me the list of things to be done before I can initiate mvl with them. And my accountant doesn't know mvl process. So before finding an accountant I want to best prepare.

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Replying to Andy556:
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By Mr_awol
02nd Jun 2021 06:38

Before reading the thread I’d assumed this was going to be an accountant and was intending to say:
1) find a good IP
2) work with them

Unfortunately this looks like a DIYer who doesn’t even want to pay an accountant so probably won’t pay the c£2500 minimum fee a half decent IP will charge, and is probably planning to use a £995 online sausage factory (and then will act surprised when they get a crap service and/or charged £££++ for extras like CT submission, or even basics like declaration of solvency)

OP what are the company’s reserves? If you’re a contractor type sitting on c£150k of cash with very little else going on, you could probably get a decent IP and an accountant to do all this for you for less than £4K Not only will it be more convenient but you may end up with some important advice which could end up saving you a good chunk of (or even all of) the extra fees - either on the initial transactions, or in the long run.

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Replying to Mr_awol:
panda ketteringUK
By ketteringUK
02nd Jun 2021 08:55

Based on the previous question from 2017, he is 'management consultant and started a secondary trade under my limited company - organizing music concers'

His spelling, not mine:)

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Replying to ketteringUK:
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By Mr_awol
02nd Jun 2021 09:30

I hadnt seen that.

Given the responses first time round im surprised (dismayed?) that he came back. Having said that, at least the original responses seem to have kept him at bay for a few years - if he'd got too much help he would probably have been a regular by now.

I don't have too much time for management consultants who charge £800 per day for their own time and begrudge paying similar (in some cases less) for professional advice. Fortunately the ones i work with are (generally) happy to pay for good advice.

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Replying to Mr_awol:
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By naty1975
02nd Jun 2021 11:22

Have 35k in reserves. My mvl agency charges me 3k but it is not going to do accounting for me. And my accountant doesn't know mvl process. So before finding an accountant I want to best prepare.

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Replying to naty1975:
Red Leader
By Red Leader
02nd Jun 2021 11:34

svetvarious svetvarious wrote:

Have 35k in reserves. My mvl agency charges me 3k but it is not going to do accounting for me. And my accountant doesn't know mvl process. So before finding an accountant I want to best prepare.

You need a better accountant.
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Replying to naty1975:
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By Mr_awol
02nd Jun 2021 11:41

Taking your post at face value, i would say:

With £35k reserves it's borderline as to whether it is even worth it. Depending on your income needs, age, current earnings, etc you may find it better to drip it out via dividends or even put in a pension contribution.

That said an MVL would probably mean tax below £1k, and potentially £Nil depending on your family circumstances.

Your accountant doesn't need to know the MVL process as (s)he just needs to prepare accounts as normal, to a date which the IP will advise upon. Normally get the last year done and then do a final one to the date of administration. Then he just needs to know how to tax the distribution(s). Of course before starting the journey you need them to estimate the total taxes and consider mitigation. If they come up with a figure much more than £700 you're in the wrong place.

The problem with moving accountants is that you might not be an attractive client for a one-off.

svetvarious svetvarious wrote:

Have 35k in reserves. My mvl agency charges me 3k but it is not going to do accounting for me. And my accountant doesn't know mvl process. So before finding an accountant I want to best prepare.

Being a little more cynical, i would say that your OP stated that you "Need to submit corporation tax return but not sure how I do it as my accounting period did not finish yet. .. How do I inform hmrc etc" which strongly suggests you neither have, nor intend to appoint, an accountant - as if you did/were then surely they will handle this.

Either way, you still aren't an attractive client as one-off work, and arriving at someone's office 'prepared' with a pre-conception of what they 'should' be doing isn't going to make you any more attractive in all honesty.

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Replying to Mr_awol:
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By naty1975
02nd Jun 2021 12:00

Thanks, indeed not the best client but I guess I will have to find one

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Replying to naty1975:
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By Mr_awol
02nd Jun 2021 14:19

Or, if you do already have one, stay with them?

After all, they dont need to know the first thing about MVL, they just need to do their normal job.

I accept that there is an argument that if they haven't already told you this, then they might not be the best people to advise on any pre-liquidation transfers of shares, or staging of interim/final distributions, etc which could bring the CGT down to £Nil potentially.

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RLI
By lionofludesch
02nd Jun 2021 07:15

What's the value of the company's assets?

A few hundred quid or a few hundred grand?

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Replying to lionofludesch:
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By I'msorryIhaven'taclue
02nd Jun 2021 09:02

And is there anything you've not told us yet, such as for example a bounce-back loan, or funds taken from the company by you; or an overdrawn Director's Loan Account?

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Replying to I'msorryIhaven'taclue:
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By naty1975
02nd Jun 2021 11:18

Very simple company accounts. 35k in reserves after I pay corporation tax. That's it

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By Paul Crowley
02nd Jun 2021 10:19

Is the company solvent?

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By naty1975
02nd Jun 2021 11:17

Company stopes trading 2 month ago

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By Duggimon
02nd Jun 2021 14:39

Is your personal income high enough that the MVL is worth it? By my reckoning, at £35,000, unless you're into additional rate tax you'd be better off with an informal strike off.

It sounds like you found some con artists on google who are charging you £3K for writing a couple of letters and filling in a form, leaving you with less of the company reserves when the dust settles.

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Replying to Duggimon:
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By Paul Crowley
02nd Jun 2021 14:53

+1
@OP
Get an accountant that understands tax
That accountant is not you

Have you checked that your MVL company is properly regulated?

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Replying to Paul Crowley:
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By naty1975
02nd Jun 2021 15:01

Yes for sure, 2 my friends contactirs used them and are very happy. I am just lacking an accountant.

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Replying to Duggimon:
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By naty1975
02nd Jun 2021 15:02

I would earn 40k in my new employment as an employee. So my 35 k will be taxed at 30% as opposed to 10% after mvl

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Replying to naty1975:
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By Mr_awol
02nd Jun 2021 15:34

svetvarious svetvarious wrote:

I would earn 40k in my new employment as an employee. So my 35 k will be taxed at 30% as opposed to 10% after mvl

Correction - 0% (or up to 2%) with MVL.
Unless you factor the IP fees for a proper comparison - so total costs up to £3,200/£35k = 9.14%

Assuming you don't have to worry about ant-avoidance, of course.

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Replying to Mr_awol:
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By naty1975
02nd Jun 2021 15:50

Yes, correct. I am aware.

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Replying to naty1975:
By Duggimon
02nd Jun 2021 17:05

svetvarious svetvarious wrote:

I would earn 40k in my new employment as an employee. So my 35 k will be taxed at 30% as opposed to 10% after mvl

You are wrong, as I have already explained.

I calculate your tax bill to be £1,870, based on what you have said. £3,000 is not good value. If you approached us to handle your liquidation we would not take you on as an MVL, we would consider it unethical when you can get a better result without it.

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Replying to Duggimon:
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By naty1975
02nd Jun 2021 21:16

Could you clarify why MVL will not be beneficial?
30% if I withdraw as a dividend is higher then any capital gains tax rate...

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Replying to naty1975:
RLI
By lionofludesch
02nd Jun 2021 21:26

svetvarious svetvarious wrote:

Could you clarify why MVL will not be beneficial?
30% if I withdraw as a dividend is higher then any capital gains tax rate...

The IP's fee will be too high.

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Replying to lionofludesch:
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By naty1975
02nd Jun 2021 22:30

Mvl company quoted 3k max so it a way cheaper then paying tax on dividends..

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Replying to naty1975:
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By lionofludesch
02nd Jun 2021 23:28

Ok.

If you say so.

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Replying to Duggimon:
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By Mr_awol
03rd Jun 2021 11:35

Duggimon wrote:

I calculate your tax bill to be £1,870, based on what you have said.

Ignoring the fact that the OP may already have used their dividend allowance (since there may be scope for splitting across two years, and in any case it would take at least that long for an MVL to get to final distribution stage in the current climate so to compare like with like at least one dividend allowance would be available) I'm sure you wont be advocating a preordained sequence of events to artificially reduce distributable reserves to a level at which an informal winding up would be permissible.

That's the only way i get to £1,870, and given that the OP has already ceased trading, closed down various schemes, and generally begun the process of either mothballing or in all likelihood closing the company I would say that if any client wanted to do that I'd be giving them a fairly heavy disclaimer on how whilst HMRC will probably never look at it, they may struggle to defend the position if subjected to any meaningful challenge.

(I am aware of course that theoretically the OP might decide this week to divi the reserves out over 2-3 years and decide next week to consider closing the company but in reality we all know that isn't the case here)

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Replying to Mr_awol:
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By naty1975
03rd Jun 2021 13:50

Thank you for your detailed response
I am curious how could it be 1800 if I would pay 30% on dividends even if I withdraw within 2 or more years as I would already be receiving employment income of 40k a year

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Replying to naty1975:
RLI
By lionofludesch
03rd Jun 2021 14:54

svetvarious svetvarious wrote:

Thank you for your detailed response
I am curious how could it be 1800 if I would pay 30% on dividends even if I withdraw within 2 or more years as I would already be receiving employment income of 40k a year

If only you had an accountant.

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Replying to naty1975:
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By Mr_awol
03rd Jun 2021 17:04

svetvarious svetvarious wrote:

Thank you for your detailed response
I am curious how could it be 1800 if I would pay 30% on dividends even if I withdraw within 2 or more years as I would already be receiving employment income of 40k a year

My response was that it wouldn't be £1870, not that it would be. I vaguely alluded to the methodology which i believe another poster is (incorrectly in this case, in my opinion) suggesting might bring it down to that.

Personally I would be looking at an MVL if it was my company/money. You could probably 'get away with' the £1870 as in reality nobody is going to look into it, but it requires some carefully timed pretence over the timing of decisions and if (by some miracle) it was looked into your then youd have to repeat that pretence.

Or you could probably get the funds out at an actual £1800 (£600 pa) over three years by paying dividends. You'd incur (non tax-deductible) accountants fees though which might make the MVL a marginally better bet anyway. As i said at the outset, it is marginal whether an MVL is worthwhile, particularly if you dont need the cash immediately.

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Replying to Mr_awol:
RLI
By lionofludesch
03rd Jun 2021 17:36

£10000 div year 1 tax £600
£10000 div year 2 tax £600
£2000 div year 3 tax £0
£13000 informal strike off tax £0, Co House fee £8

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Replying to lionofludesch:
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By naty1975
03rd Jun 2021 17:50

lionofludesch wrote:

£10000 div year 1 tax £600
£10000 div year 2 tax £600
£2000 div year 3 tax £0
£13000 informal strike off tax £0, Co House fee £8

How can it be 600 on 10000?
The higher tax payer rate is 32%?

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Replying to naty1975:
RLI
By lionofludesch
03rd Jun 2021 17:57

svetvarious svetvarious wrote:

lionofludesch wrote:

£10000 div year 1 tax £600
£10000 div year 2 tax £600
£2000 div year 3 tax £0
£13000 informal strike off tax £0, Co House fee £8

How can it be 600 on 10000?
The higher tax payer rate is 32%?

32½%, actually.

But you're not a higher rate taxpayer. Unless there's something you've not told us.

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Replying to lionofludesch:
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By naty1975
03rd Jun 2021 18:24

lionofludesch wrote:

svetvarious svetvarious wrote:

lionofludesch wrote:

£10000 div year 1 tax £600
£10000 div year 2 tax £600
£2000 div year 3 tax £0
£13000 informal strike off tax £0, Co House fee £8

How can it be 600 on 10000?
The higher tax payer rate is 32%?

32½%, actually.

But you're not a higher rate taxpayer. Unless there's something you've not told us.


I did tell. I have a normal employment with 40k salary, so I would have used all my allowance by that employment. So any pound of dividendd I will be withdrawing will be taxed at 32%
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Replying to naty1975:
RLI
By lionofludesch
03rd Jun 2021 18:37

svetvarious svetvarious wrote:

I did tell. I have a normal employment with 40k salary, so I would have used all my allowance by that employment. So any pound of dividend I will be withdrawing will be taxed at 32%

Even if you're paying at Scottish rates, £40,000 isn't enough to make you a higher rate taxpayer.

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Replying to lionofludesch:
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By Mr_awol
07th Jun 2021 08:43

lionofludesch wrote:

£10000 div year 1 tax £600
£10000 div year 2 tax £600
£2000 div year 3 tax £0
£13000 informal strike off tax £0, Co House fee £8

1) Relies on an extended distribution period (particularly if there have already been dividends in the current year)
2) Doesnt work if planned in advance. As i say, relies on pretending to suddenly decide to strike off when actually you have artificially reduced the reserves below £25k and as such do not qualify.

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Replying to Mr_awol:
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By naty1975
03rd Jun 2021 17:39

Thank you.
I believe that mvl is better in my situation as I save minimum (40*0.32% -40*10%) 8k less mvl fee of 3k. Net 5k.
Still good for me
Even if I withdraw 40k over next few years thru will all be taxed at higher rate of 32% due to my normal employment, so no use to me.
Only 2k free divedent per year

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Replying to naty1975:
RLI
By lionofludesch
03rd Jun 2021 18:01

svetvarious svetvarious wrote:

Thank you.
I believe that mvl is better in my situation as I save minimum (40*0.32% -40*10%) 8k less mvl fee of 3k. Net 5k.
Still good for me
Even if I withdraw 40k over next few years thru will all be taxed at higher rate of 32% due to my normal employment, so no use to me.
Only 2k free divedent per year

I'm beginning to wonder why you asked the question as you seem to have known the answers all along.

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Replying to naty1975:
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By Mr_awol
07th Jun 2021 08:45

You said your employment was £40k though? So when Lion devised his 'plan that doesnt quite work' he assumed you have £10k available at Basic Rate each year

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By The Dullard
02nd Jun 2021 16:01

25 posts. Why?

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Replying to The Dullard:
RLI
By lionofludesch
03rd Jun 2021 18:47

The Dullard wrote:

25 posts. Why?

Because although he doesn't deserve help, I hate to see a fella hang himself.

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Replying to The Dullard:
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By Paul Crowley
06th Jun 2021 15:57

Because OP does not understand how basic rate allowance operates is my understanding.

OP has made a decision based on best mates opinions and online MVL company.
He was not looking for any difference of opinion, and most accountants (me included) always look for options that work and give client the choice of options.

We have a client that has chosen to spread dividends over years as a matter of principle.

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Replying to Paul Crowley:
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By Tax Dragon
06th Jun 2021 20:49

I think Dulls was asking why you (anyone) seemed to be trying to help. Why any replies?

Or do you (all) want Aweb to be a free personal tax advisory service?

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Replying to Tax Dragon:
RLI
By lionofludesch
06th Jun 2021 21:43

Tax Dragon wrote:

I think Dulls was asking why you (anyone) seemed to be trying to help. Why any replies?

Or do you (all) want Aweb to be a free personal tax advisory service?

Well, I'm just an amateur these days.

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Replying to lionofludesch:
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By Tax Dragon
06th Jun 2021 21:54

To be fair, you weren't solely responsible for the 25, now 49, posts.

Dullard's question stands, IMHO.

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Replying to Paul Crowley:
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By naty1975
06th Jun 2021 21:00

Paul Crowley wrote:

Because OP does not understand how basic rate allowance operates is my understanding.

OP has made a decision based on best mates opinions and online MVL company.
He was not looking for any difference of opinion, and most accountants (me included) always look for options that work and give client the choice of options.

We have a client that has chosen to spread dividends over years as a matter of principle.


Start by gathering information from forums/Internet and then identifying a accountant is not uncommon
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