earnings from closing down limited company(final dividend)

[sydneysider808]

Hi everyone, I'm planning to apply for my Tier 1 extension in approximately 4 months time. I just have a question regarding how closing down my limited company may affect this.

At the moment, I'm running a limited company and taking salary + dividends. However, I have been offered a permanent job and I have accepted this offer. I will now be closing down my limited company which still has profits left in the company bank account once I have deducted all taxes and expenses.

I asked my accountant and they said that the remaining money in the bank account can be paid out to me as a "capital redistribution". I googled for more information regarding closing down limited companies and some sites referred to this final payment as a "final dividend".

Would I be able to use this final payment as part of my Tier 1 earnings evidence? The money remaining in the company bank account is quite a substantial amount and I need it to qualify for the earnings criteria, so just wondering if anyone has had any experience similar to this....


Thanks and wish everyone luck with their applications! :)

- Clarissa

[John]

I have been offered a permanent job and I have accepted this offer. I will now be closing down my limited company

Why? That is, why rush to decide to close down the company? You never know, you might need the company at some time in the future. The cost of keeping the company in existence for a year or two is minimal.

And yes the company can pay a dividend.

[AccountantMatthew]

The 'capital redistribution' is available as a extra statutory concession from HMRC - known as an ESC C16. From what you say you seem to have done some research but just in case this article is useful:-

http://www.poweraccountax.co.uk/data/me ... ompany.pdf

(by the way I'm not associated with the firm behind the website or with the firm behind the article itself; I just found it useful).

As it is a concession it isn't granted by right but it is often a more tax efficient way of withdrawing funds from the business.

Where the potential sticking point is, is that it is a distribution of capital rather than income (and isn't a dividend). I haven't seen it specifically disallowed from being included as being income for UKBA purposes but there again I can't see it on the 'allowable list' either. Potentially the only way to find out is to get direction from UKBA but I'm not entirely sure whether the call centre would be able to help too much; whilst us bean counters and tax practitioners will know of it, it's unlikely that immigration folk would need to.

Certainly as far as tax goes, it is a return on your capital investment rather than income but UKBA may decide otherwise (after all they have previous with the employed v self employed definition).

Obviously the last thing I want to do is step on your accountant's toes so I'm sure that you will be able to work something out with him/her as to the timing of closing your company down and how you structure funds withdrawal and when. I guess all you can do is show them the UKBA rules and then you can decide what further direction you take.

Good luck!