Company Closure and capital distribution

Company Closure and capital distribution

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One of my client wants to strike off his company.  Company’s accounting year end is 31 October.  Accounts for the last year to 31 October 2011 has already been prepared but not submitted yet to either HMRC or CH.  I have prepared her final cessation accounts from 1 Nov 11 to 31 May 2012.  There has not been many transactions since the previous year end other than some expenses. There were approx £8K left in company’s bank account which director has withdrawn in May 2012. Director is also working for another company on a gross salary of £41K. If I treat this £8K as dividend in final accounts that will push his earnings into 40% tax band making him pay tax @ 32.5% on dividend income.  My questions are :-

  1. Can we treat this as capital distribution considering money has already been transferred to his private account? If so, how it should be shown in the accounts?
  2. Does he have to put this money back into company’s bank account to qualify as capital distribution and take out only when HMRC approval is obtained.
  3. Considering there were not any income or expenses in May 2012, it would be better to prepare final accounts up to 30th April 2012 instead of 31 May 2012 while the money was still held in company’s bank account to avoid showing it as overdrawn directors current account or dividend in the company’s account and treat this £8K transfer of money to his private account as capital distribution.
  4. Considering there were no taxable profits in the last financial year and per final cessation accounts, do we still need to get HMRC clearance (and their approval for funds to be treated as capital distribution) before he can apply to CH for company to be strike off.

Any responses would be highly appreciated.

Many thanks in advance.

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By v k ratliff
19th Jun 2012 16:03

See the answers to yesterday's question entitled "What is the disposal date for company strike off?"

Those answers address several of the points raised in your question

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