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Post-ESC C16 - again

Are corporate shareholders potentially disadvantaged (assuming that SSE is not available)? Capital treatment of distributions totalling less than £25k appears to apply without option, or am I missing something?


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By blok
17th Feb 2012 06:30


I was under the impression that the new legislation applied to distributions during the course of winding up, so I suppose if a £24k distribution was anticipated it should be done prior to winding up in order to create the income effect.

Otherwise, I think you are right, this would be a problem.

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17th Feb 2012 08:25

But then we run into the old problem

The new legislation applies not only to distributions in the course of winding up - but also where the company intends to seek dissolution. Whilst it is easy to demonstrate intent (to bring distributions within the new rules) how does one demonstrate lack of intent (to keep them out)? I contacted HMRC on the matter, and their response was that all facts would need to be considered, in other words bringing so much subjectivity and uncertainty into the equation so as to make the new legislation a nonsense - I anticipate many cases ending up in front of the Tribunal where the company maintains that a dividend was 'pre-intent' and HMRC arguing otherwise.

Take the case of my brother's business. It is likely to continue for some time, but the nature of it is such that it will never be sold or passed on. He therefore intends to wind it up at some point - just not yet. Since he already has that intention, does that bring every dividend for the next 10 years or so within the new rules? Of course it doesn't - but the way that the legislation is written, they could be.

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Molehill enlargement

If you make the (admittedly simplified) assumption that all the shareholders are in the same poistion and must accept the same treatment, it's either the case that:

ER isn't available to the individuals, so everybody's better off taking the cash out, leaving the company empty for a time and then letting it be struck off.ER is available to the individuals, which means that a corporate member is likely to be entitled to SSE.

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17th Feb 2012 10:41

I take the point, George

But that is exactly why I indicated in my opening question the assumption that SSE was not available - I can easily point to a number of my clients where ER would be available to the individuals but no SSE to the corporate shareholders (and, I have to say, vice versa).

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