UPDATE – 9 DECEMBER 2015
An element of further clarity has now been added. It would seem HMRC will deem 2 years as a reasonable timescale for this. Ie if you start up a new company within less than 2 years of the old one ceasing, you are at risk of HMRC treating any distributions as dividends rather than capital gains.
Previous text on this page left as was below, as (ignoring the amount of time which has now been clarified) we feel the other items are still relevant.
HMRC put the transaction in securities rules in place to prevent someone getting tax benefits from transferring all the trade and assets except cash from Old Ltd to New Ltd, liquidating Old Ltd, then continuing to trade via New Ltd.
If you’re a contractor looking to extract cash and continue contracting after the liquidation, you do need to be wary of these rules. Indicators that your new business is a completely new venture rather than a continuation of the old one include:
Don’t transfer the trade:
- Ensure the first client of your new company isn’t the same as the last one of your old company,
- Leave a break in between closing one company and starting the next (EDIT – post 9 December 2015 the length of time to be “safe” has been decided as 2+ years).
Don’t transfer the assets:
- Use it as a good excuse to get new equipment like laptop and phone,
- Have a completely different company name/website, not Joe Bloggs Ltd followed by Joe Bloggs 2 Ltd (to limit arguments the brand/goodwill has been transfered).
Doing all the above should leave HMRC little scope to argue you’re continuing the same business, leaving you safe to gain the benefit of entrepreneurs relief on cash extraction from your members voluntary liquidation.