By nature, contractors are incredibly resilient to change. But just because you are good at responding to changing circumstances, doesn’t mean you enjoy it – especially when it means that you’re losing money.
The rickety IR35 reform wagon has been rolling along for several years now. And while most limited company contractors hoped that it may have stalled or changed course, the new rules now look certain to take effect this April.
This means that, in a matter of months, limited company contractors that are judged to be ‘disguised employees’ by their risk-averse clients will see National Insurance contributions and income tax automatically deducted from their pay.
Many IR35-affected contractors will be better off switching to a PAYE umbrella arrangement (something that our sister company can help with), but this still leaves the question of what you do with your limited company once you stop earning through it.
When you should use a voluntary liquidation
A Members Voluntary Liquidation (MVL) is often the most tax-efficient way of closing down a solvent business. For contractors, it’s usually used when they retire, emigrated or take on an employee role with another company.
When the director/shareholder of a limited company decides that they no longer need the solvent company it makes sense that they want to extract the cash and other assets that are tied up in the business in the cheapest way possible.
This is when you should think about approaching an insolvency expert to manage your company’s liquidation.
Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency said: “We’ve received dozens of enquiries from limited company contractors already in 2021 and January isn’t even over yet. Many aren’t certain on how IR35 will affect them, but they want to explore their options ahead of the April deadline.
Benefits of an MVL
Visit Umbrella.UK Insolvency’s specialist MVL page for contractors here.
Think you will be affected by IR35? Speak to an Umbrella.UK insolvency expert about voluntary liquidation and other insolvency services today. Call: 0800 611 8888.