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Closing Your Company

There may come a time when contracting is no longer right for you. You may have been offered a permanent job, or you may be simply changing careers.

We can help you plan your exit in a tax efficient way. There is an additional fee for the work undertaken in closing your company, however the tax savings far outweigh any fees incurred.

Reserves of less than £25,000

If you have reserves of less than £25,000 then the most tax efficient way of closing your business is to pay a capital distribution and claim Entrepreneurs' Relief.

The alternative would be to pay out an income distribution and pay up to a maximum of 32.5% income tax on your dividends, or 37.5% where your total personal income is greater than £150k in the year.

A 'capital distribution' is a tax beneficial way of distributing company reserves . This is because the first £11,000 of a capital distribution is tax free and the remaining taxed at 10% on the basis that you claim Entrepreneurs' Relief. We will assess your eligibility for claiming Entrepreuners' Relief.
Below is an illustration of the tax saving you would achieve for paying out a capital distribution of £25,000:.
Your tax saving does not factor in fees incurred.
*This is an illustration only. For a tax calculation based on your circumstances please get in touch. Your tax saving does not factor in fees incurred.

Reserves greater than £25,000

Where your reserves are greater than £25,000, then the only way to pay a capital distribution is to undertake a Members Voluntary Liquidation (MVL) and claim Entrepreuners' Relief. We will assess your eligibility for undertaking an MVL and claiming Entrepreuners' Relief.

A key thing to note is that an Members Voluntary Liquidation (MVL) can only be performed by a licensed practitioner. Dhikr Accountants are not licenced to undertake MVL work. Dhikr Accountants and Frost Group have partnered up to offer our contractors this service for a fee of £850 plus VAT & disbursements. Disbursements vary from client to client and will be determined on a per client basis by the liquidator.
Below is an illustration of the tax saving you would achieve from paying a capital distribution of £85,000 via an MVL.
Your tax saving does not factor in fees incurred.
*This is an illustration only. For a tax calculation based on your circumstances please get in touch. Your tax saving does not factor in fees incurred.

Expenses you can deduct

Do you qualify for deductions on your expenses? Contact Dhikr Accountants for more information.

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IR35, what is it?

Let’s talk about a subject many contractors may dislike: IR35

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VAT

VAT: The application of a 20% tax on your sales invoices.

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The flat rate scheme (FRS)

Flat Rate Scheme (FRS): For businesses whose forecast annual sales will be £150,000 or less in the next year.

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24 month rule

According to HMRC, contractors are entitled to claim travel and subsistence expenses if their workplace is considered temporary. This is designed for contractors whose professional position requires them to travel between sites during the course of their contract.

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Closing your company

There may come a time when contracting is no longer right for you. You may have been offered a permanent job, or you may be simply changing careers.

Learn More »

Take home pay calculator

The take home pay calculator gives you an illustration of what your take home could be.

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FAQs

Get answers to the most commonly asked questions.

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Contractors Login

How we can help?

For clients with reserves of less than £25,000 we can assist you with the end-to-end process including advice on whether you qualify for Entrepreneurs' Relief.

For clients with reserves of more than £25,000, anti-avoidance legislation exists whereby a Members Voluntary Liquidation (MVL) is only permitted where certain conditions are met. We can advise on your eligibility to undertake a MVL and claim entrepreneurs relief. We will put you in touch with the Frost Group who will undertake the liquidation for you; we will continue to assist you with all other accounting and tax work required to liquidate your company.

We bring together the technical expertise of a large firm with the feel of a smaller organisation that really cares about your business.

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© Dhikr Accountants is a trading name of Dhikr Accountants Limited

Company Number: 10500267. Place of Reg: England & Wales Registered Office: 36 Uxendon Crescent, Wembley, Middlesex, HA9 9TN
Tel: 07591 207278
Email: imran.anjum@dhikr-accountants.co.uk
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