# Redundancy from Ltd company - i am the director



## homeowner

I am taking a new PAYE job, have been contracting in IT for years as a Ltd company.  Can I make myself redundant from my Ltd company and pay myself redundancy?  Do I have to close my company if I do this or can i leave it not-trading for a number of years?

Any advice appreciated.


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## bazermc

homeowner said:
			
		

> I am taking a new PAYE job, have been contracting in IT for years as a Ltd company. Can I make myself redundant from my Ltd company and pay myself redundancy? Do I have to close my company if I do this or can i leave it not-trading for a number of years?
> 
> Any advice appreciated.


 
not 100% but do not see any reason why you cannot make yourself redundant and pay a lump sum there are limits to how much you can take tax free - once the company ceases trading you can then leave it dormant or liquidate it


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## homeowner

Thanks bazermc.  Do you know if I take redundancy does it impact on me going back to contracting in a few years with my old ltd company (assuming i leave it dormant in the meantime).....ie can i "hire" myself back in a few years  after taking redundancy?


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## RonanC

homeowner said:
			
		

> I am taking a new PAYE job, have been contracting in IT for years as a Ltd company. Can I make myself redundant from my Ltd company and pay myself redundancy?


 
couple of questions for you, Would you be resigning from the company as a director or would the company be removing you as a director. Are you a shareholder of this company. If you did resign would the company be left with at least two directors?? 




			
				homeowner said:
			
		

> Do I have to close my company if I do this or can i leave it not-trading for a number of years?
> 
> Any advice appreciated.


 
You can leave the company non-trading for as long as you like but the company still must file the relevant documenst with the Companies Registration Office (annual return and accounts) and with Revenue. 

What might be worth looking into is the "Voluntary Strike Off" process where you can close the company down as long as there is no money owed to any creditors or to revenue. Then you can distribute any money left to the shareholders, which if you are one would then get the money. 

If you wish then you could always set up another company in time.


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## homeowner

RonanC said:
			
		

> couple of questions for you, Would you be resigning from the company as a director or would the company be removing you as a director. Are you a shareholder of this company. If you did resign would the company be left with at least two directors??


 
 No, i would not be resigning.

 Basically can i take redundancy and still leave the company intact?


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## ubiquitous

You can take redundancy, fees, bonus or additional  salary from the company but it really doesn't matter what you call it, all such payments will be fully taxable and subject to PAYE/PRSI. This is obviously not a genuine redundancy situation and as such you have no grounds to claim preferential tax treatment on that basis nor can you make a claim from the State Redundancy Fund .


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## woods

I want to disagree with this info (but I hope that I am wrong). 
We have just sold a small company and we agreed that the working director would be given a tax free redundancy payment. The accountant says that he has to give it back as you can not make yourself redundant.
There was money in the company to do this and a balancing financial position will be reached so that excess money on the day of handover will be paid back to us so it was not as if the new owner was going to suffer.
It is just that it is seen as what it was. A means of reducing his tax.


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## ubiquitous

woods said:
			
		

> I want to disagree with this info (but I hope that I am wrong).
> We have just sold a small company and we agreed that the working director would be given a tax free redundancy payment. The accountant says that he has to give it back as you can not make yourself redundant.
> There was money in the company to do this and a balancing financial position will be reached so that excess money on the day of handover will be paid back to us so it was not as if the new owner was going to suffer.
> It is just that it is seen as what it was. A means of reducing his tax.



Are you sure this arrangement will hold water if it is examined and/or challenged by the Revenue?  I very much doubt it.


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## RonanC

homeowner said:
			
		

> No, i would not be resigning.


 

So how would you be taking redundancy and still be employed by the company as a director???


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## homeowner

RonanC said:
			
		

> So how would you be taking redundancy and still be employed by the company as a director???



I dont see how I am "employed" as a director if I am not receiving a salary for the "job".  There are two directors, one who doesnt participate and myself.  The conpany will not be trading and I will not be drawing any salary from it nor claiming expenses or anything.  It will be completely non trading when I "make myself redundant".  The only reason I am not winding it up is in case I want to go back to contracting and leave PAYE in the near future.

If it is not allowed to make yourself redundant and pay yourself redundancy, what about winding up a company, are there any provisions for taking a tax free lump sum out of the company?

What is the criteria for being redundant for tax purposes?


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## homeowner

RonanC said:
			
		

> So how would you be taking redundancy and still be employed by the company as a director???



I dont see how I am employed as a director if I am not receiving a salary for the job.  The company will not be trading and I will not be drawing any salary from it nor claiming expenses or anything.   The only reason I am not winding it up is in case I want to go back to contracting and leave PAYE in the near future.

What is the criteria for being redundant for tax purposes?

If it is not allowed to pay yourself redundancy, what about winding up a company, are there any provisions for taking a tax free lump sum out of the company?


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## homeowner

ubiquitous said:
			
		

> This is obviously not a genuine redundancy situation and as such you have no grounds to claim preferential tax treatment on that basis nor can you make a claim from the State Redundancy Fund .



Why is it not a genuine redundancy?  I was working getting a salary and now I will no longer be doing this and I will be working and getting a salary somewhere else.


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## askalot

homeowner said:
			
		

> Why is it not a genuine redundancy? I was working getting a salary and now I will no longer be doing this and I will be working and getting a salary somewhere else.


 
Generally when people are made redundant they are not party to the decision to 'let people go', once management has made the decision they might ask if anyone wants to take voluntary redundancy but this doesn't apply in the case you've outlined. It really sounds like you are resigning and moving jobs.

But hey! You might get away with it and if you do good luck.


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## tiroileain

I was contracting in Ireland until 2002. I wound up my company and paid myself a tax-free redundancy sum. 

I'm not sure if you can do this if you leave the company dormant. With an annual charge of leaving a company dormant at about €400, I didn't see the point of not winding it down. If I contract again in Ireland, I'll just open a new company.


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## ivorystraws

Where does the €400 charge come into play for leaving a non-trading company dormant?


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## tiroileain

ivorystraws said:
			
		

> Where does the €400 charge come into play for leaving a non-trading company dormant?


 
I think this was introduced around 2002, I can't remember exactly how much, or what exactly it's for..


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## ivorystraws

Introduced by who? I know of an IT Contractor that has a non-trading company which is lying dormant and he doesn't pay any such charge. 
Is this charge documented somewhere on the CRO site or is the charge even related to the CRO?


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## ubiquitous

No such charge is imposed by the CRO except for the normal €40 'paper' filing fee for the annual B1 & accounts filing. If returns are filed late, late fees of €3 per day are charged, and a statutory audit is required even if the company is dormant. The total cost may be well in excess of €400 given all the bureaucracy involved.


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## tiroileain

ubiquitous said:
			
		

> and a statutory audit is required even if the company is dormant.


 
That's probably it, AFAIK this wasn't required until relatively recently..


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## col

I think it depends on the PRSI rate you were paying as to whether you are entitled to a redundancy payment.As a director/shareholder you were probably paying the reduced level of PRSI and therefore the company is not allowed to claim back the rebate from the government for you. However you are allowed make a tax free claim on the company for loss of office if you are resigning.


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## homeowner

I currently have an audit exemption from revenue, would I still need a statutory audit if the company is dormant or if i wind it up?


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## homeowner

Just to let you all know I contacted revenue and they emailed me back the following:

"As you paying PAYE and PRSI you are entitled to pay   yourself a redundancy payment. You can leave your company as dormant, which   means its not exactly ceased trading but we will not be looking for returns   and we'll review the situation again in a couple of years. If you could just   let us know what date the company will stop trading we can proceed with   updating our records. If you require any further information please do not   hesitate to contact us."

I asked the followed question in reply:
Thank   you for your reply. One follow up question - if I pay myself redundancy will   it be treated like a regular redundancy payment and therefore not be subject   to tax if it comes within the rates for redundancy payments as outlined in   revenuue leaflet " IT 21 - Lump Sum Payments on Redundancy/Retirement"   or will I have to pay PAYE and PRSI on the total amount?   

And they replied

"Yes please refer to IT 21 when   calculating your lump sum, it would be treated in the regular way as any   other employees lump sum. ​ Regards​ South County Customer   Services "
​


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## RonanC

ok this is the bit that i dont understand..

You are making your self redundant but at the same time continuing to be a director of the company. That makes no sence at all to me. The Ltd Company is a seperate Legal entity and it appoints you according to its Memo & Arts. Legally you are an "employee" of the company in the position as director even if you are not being paid. And if you seek redundancy surely you must also be ending your position as director??? And if you are a shareholder of this company you must then appoint a new director in your place or you would be breaking the companies acts regarding the "2 director rule" and would therefore lose your limited liability until the company appoints a replacement director.


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## wowser

RonanC said:
			
		

> Legally you are an "employee" of the company in the position as director


I don't think so. You can be a director of a company without being an employee - I know plenty of contractors whose mother or brother, etc. are directors but obviously not employed by the company.

Regarding the information from Revenue: they might not need accounts from a dormant company but the CRO do.  Any accountant will charge a few hundred euro to do that each year.  I reckon you're better off just winding it up.


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## RonanC

wowser said:
			
		

> I know plenty of contractors whose mother or brother, etc. are directors but obviously not employed by the company.


 
but most of these dont even know their responsibilities as a director.



> the primary function of a director is to manage the company on behalf of the members (shareholders)


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## wowser

RonanC said:
			
		

> but most of these dont even know their responsibilities as a director.


Whatever about their responsibliities they're not considered employees as far as the Revenue are concerned.  I'm a director of my apartment's management company but I'm definitely not an employee.


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## Nostromo

I'm resurrecting an oldish thread here, but it seems to me that it was more or less left hanging and the original question applies exactly to my situation (so I'd love to know the answer!)

So, if it is possible to move from contracting (as a director+employee of own Limited Company) to other PAYE employment while still keeping your own company dormant, then

1. You give notification but no further payments to Revenue, and annual accounts plus payment to CRO - is this correct? 
2. Is it possible to make yourself redundant from your own company (which is remaining dormant, however) and get a *tax-free* redundancy payment?

Homeowner, any update on your adventures in this area would be very welcome 

Thanks all

N.


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## stuart hall

Can a director who is one of four directors but is also an employee get redundancy?


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