IT Contractor - Dormant limited company

W

WGT

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Hi,
After 5 years contracting through my limited company, I will soon be joining another company as an employee. In other words I will not be self-employed. There are funds in the limited company, so I was thinking with the upcoming budget sure to increase taxes .....
1. Should I pay some of the funds to myself as salary.
2. Can a director pay himself a once-off tax-free gift (I'm sure I've heard this somewhere before.
 
You could put it in a pension.
Best thing would be to talk to your accountant.
 
How much is left in teh company? Did you use all of your lower rate allowances against salary? The pension contribution might be a good option, depending on your circumstances. An accountant will help you.
 
you can pay yourself an exempt termination payment 10160 + 765 per complete year of service plus another 10k if you have no company pension

Any funds left if you liquidate pay out as a capital sum and pay cgt
 
capall said:
you can pay yourself an exempt termination payment 10160 + 765 per complete year of service plus another 10k if you have no company pension

Any funds left if you liquidate pay out as a capital sum and pay cgt
Click to expand...

Thanks Capall, so essentially if I was to wind up my limited company (in which I DO have a company pension), I could get a tax-free sum of (10160 + (765 * 5 years) = 13,985). Is this correct?
I have 34K in my company at the moment. So this would mean 20k would be subject to CGT. Is this correct and what rate of CGT would I have to pay?
Also, what would happen to my company pension?
Thanks
 
Just to add. I'm about to start a permanent job. Not too sure with the current economical climate whether I'll contract again through a limited company. My question is, if I wind up my limited company now and receive the tax free exemption of 10,160 as Capall suggested, could I then in the future set up another limited company if I decided to contract again. I know this sounds a bit sneaky, but I simply don't know whether or not I'll be using the company again and I don't want to just leave funds lying in the business account.
 
Search on IT21 ,it is the revenue leaflet explaining tax relief on lump sums and top slicing relief

CGT is now 22% ,might go up in the budget

There is no problem winding up the company and setting up a new company in the future if you so require
 
If you are joining a new pension scheme you can transfer your existing pension to that
The adminstrators of your new pension will tell you what you need to do
 
capall said:
If you are joining a new pension scheme you can transfer your existing pension to that
The adminstrators of your new pension will tell you what you need to do
Click to expand...

Thanks again Capall, however in my new job, i only join their pension scheme after 6 months. I was hoping to wind up the limited company sooner.
 
You can wind up the company and leave the pension in situa till you know what you want to do with it
 
Thanks Capall for all the info so far. Much more info than I'm getting from my accountant.
If I choose to liquidate the company, do you know ...
1. How much liquidation fees will be (or where I can find out)?
2. Where would I find/engage such a liquidator?
 
If all that is left in the company is cash then consider distributing this and just having the company struck off. This will save on fees.
 
Arch2 said:
If all that is left in the company is cash then consider distributing this and just having the company struck off. This will save on fees.
Click to expand...

and by taking this approach can I pay myself and my fellow director a tax exempt fee of 10165 + 765 for each year of service.
Was talking to a liquidation company (Friel and Stafford) and they said it would depend on whether I was Class S1 or not, the Class apparently dictates whether I'm a candidate for redundancy.
Any Ideas??
 
Unless you're a director of your new employer, it may not be advisable to transfer your company pension fund into your new employer's scheme. Reason is that your current scheme allows you more options at retirement (Approved Retirement Fund) because you are a shareholding director of the company. You would not have these options in a new scheme if you are not a shareholding director of the company. If you transfer your fund into your new employer's scheme, you would lose the additional options in respect of your existing fund.

An alternative would be to put a last-minute contribution into your company scheme while you're still working for it. Then, when you wind up the company, transfer the company scheme fund into a Buy Out Bond (also known as a Personal Retirement Bond). This preserves your options at retirement.
 
"Was talking to a liquidation company (Friel and Stafford) and they said it would depend on whether I was Class S1 or not, the Class apparently dictates whether I'm a candidate for redundancy."

I would diagree with the above. As it is not a redundany payment that is being made by your company but an ex gratia payment. I think the liquidator is thinking in terms of statutory redundancy which you would not be entitled to.

I would be interested to hear how you get on.
 
As the previous poster said the cheapest way to wind down a company is by applying to CRO for a voluntary strike off
You will need to be up to date with your cro and company tax affairs to do this
 
capall said:
As the previous poster said the cheapest way to wind down a company is by applying to CRO for a voluntary strike off
You will need to be up to date with your cro and company tax affairs to do this
Click to expand...

Thanks for that. Friel & Stafford liquidators said they would charge 3.5k+ VAT, so CRO sounds the cheapest option. I've emailed my accountant, telling him about the ex-gratia payment of 10,160. I've also read that my co-director (non-active 1% holder) can also receive an ex-gratia payment of 10,160. Is this true?
Funny, my accountant never tells me this stuff. I wonder is he just trying to avoid the hassle. He's also very slow at getting back to me.
Anyway, rant over. Thanks for the advice and can you confirm that we can both avail of the ex-gratia payment. :)
 
As its a redundancy/retirement relief ,the other director would need to have been an employee also,the relief is for payments from your EMPLOYER
 
LDFerguson said:
Unless you're a director of your new employer, it may not be advisable to transfer your company pension fund into your new employer's scheme. Reason is that your current scheme allows you more options at retirement (Approved Retirement Fund) because you are a shareholding director of the company. You would not have these options in a new scheme if you are not a shareholding director of the company. If you transfer your fund into your new employer's scheme, you would lose the additional options in respect of your existing fund.

An alternative would be to put a last-minute contribution into your company scheme while you're still working for it. Then, when you wind up the company, transfer the company scheme fund into a Buy Out Bond (also known as a Personal Retirement Bond). This preserves your options at retirement.
Click to expand...

Accountant is setting the wheels in motion to wind up company.
Contributions to Pension since Feb 2001: 83,469
Current/Transfer value of fund: 50,916

Given the fact that I'm not joining my current employer's pension scheme for 6 months, can I transfer the Buy Out Bond, to the new Scheme in 6 months or am I best advised to not wind up the company (as the company is not in debt).
 
An alternative would be to put a last-minute contribution into your company scheme while you're still working for it. Then, when you wind up the company, transfer the company scheme fund into a Buy Out Bond (also known as a Personal Retirement Bond). This preserves your options at retirement.
Click to expand...

Hope I'm not repeating myself here but just a specific question.
My limited company will soon be liquidated. When the pension company scheme is transferred into a Buy Out Bond (then owned by me, I guess).
Can I as an individual continue to make contributions into it?
An advisor has told me I should keep this Buy Out Bond seperate from any pension scheme I may join in the future (so as to preserve the options at retirement).
 
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