I was a member of an LLP which went into liquidation last year following several years of unprofitable trading. Whilst trading I was permitted to take some drawings as the LLP was my sole source of income. That means that when the LLP went into liquidation I had an overdrawn capital account to the tune of some tens of thousands - not an insignificant sum, but which had accrued over a long time.
I now need to make an offer to the liquidator on repaying the overdrawn amount - the offer that I make will be less than the total amount owing. So if it is accepted, the remainder of the overdrawn account will be written-off.
Will I have to pay CGT on the written-off amount? I have had conflicting advice on this from the liquidator and from my accountant, and I have spoken with a couple of different tax professionals who have also not been able to clarify the point for me. I see this as quite important, as the offer that I make to the liquidator will need to take this into account.
If I do have to pay CGT, would I be in any way eligible for entrepreneurs relief (which was mentioned by one of the advisors)?
Replies (3)
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Why do you think the liquidator will not collect the full amount from you? How would that be fair to the other parties involved? I think you may be wasting your time investigating the tax consequences of being allowed to keep some of the money you owe.
Then the LLP just had a bad debt because you are insolvent. I don't think insolvency triggers a tax charge to the extent of an insolvent debtor's unpaid liabilities.