Share this content
0
588

Informal Company Winding Up

Informal Company Winding Up

Good Morning,

I have a small non trading client [ceased trading 31/03/2015] with undistributed reserves exceeding the cash held of approx. £40K. Dividends have been paid each month since trading ceased but the client now wants to wind up matters by 31/03/2016 and distribute the remaining cash to shareholders so company can be struck off.

I believe that the maximum distribution for it to be treated as capital and therefore for CGT to kick in is £25K but with £40K approx. to remove from the company to shareholders it seems that such a value will attract Income Tax on the whole amount - two of the shareholders are already significant higher rate taxpayers.he third shareholder is their other trading company who own 50% of the shares.

Any ideas how best to approach this one and extract in the most tax efficient manner? I am also wondering whether Entrepreneurs Relief could also apply as the company traded up to 31/03/2015?

Peter

Replies

Please login or register to join the discussion.

By Ruddles
02nd Mar 2016 09:34

MVL

First things first though - what is the issued share capital?

Thanks (0)
avatar
02nd Mar 2016 11:47

Issued Share Capital is 100 Ordinary £1 shares of which 25 are held by each of the common directors [common to other company that continues to trade and 50 held by the latter trading company.

 

Peter

Thanks (0)
By Ruddles
02nd Mar 2016 11:54

It would be nice if all relevant information were provided from the start. I'd just pay a dividend and be done with it. OK, so the individuals would have a higher-rate liability but the 50% paid to the corporate would be tax-free (until such time as cash extracted from that company).

You might also consider waiving the individuals' dividends - possibly meeting with various anti-avoidance measures but given the amounts I doubt that HMRC would be too interested.

Out of interest, if reserves exceed cash, what is the balance?

Thanks (0)
Share this content