Company A transferred its trade to a newly formed Company B. The shareholders in company B are the same as company A.
The directors now want to liquidate Company A , through striking off, and using ESC C16 wish to claim entrepreneurs' relief on the capital distribution.
My question is - would HMRC treat the "hive down" of business as a deliberate exercise to claim the relief and secure a tax advantage and as a result would deny the relief.
Any comments greatly received.
Abdul
Replies (3)
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TiS
Theoretically, the transactions in securities legislation could apply to an "informal liquidation" using ESC C16. That view is expressed often expressed by certain commentators in situations such as this.
It is more likely though, whilst ESC C16 remains mere ESC, that HMRC simply wouldn't grant the concession in these circumstances. Whilst it is not a requirement under the concession, it is now common practice for HMRC to seek confirmation that the shareholders are not conducting/will not in the future conduct a similar corporate business. They're not at all keen on the practice of "phoenixing".
Hard to say
Prior to the FA2010 changes, I think it had been held that a liquidation want't a transaction in securities, the way the former provisions were worded. I think though that some commentators have expressed doubt whether this still holds following the rewrite.