Can ESC C16 apply to distribution to uk resident shareholders on winding up of a french company?

Can ESC C16 apply to distribution to uk...

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We have clients who are the shareholders of a french company who owned a french property commercially used as holiday let. This has now been sold and the french company has paid the french tax due. It is being wound up. Can we apply to HMRC for clearance to use ESC C16 to treat the distribution to the two shareholders of the remaining funds (less the original amount they lent to the company to buy the property) as a capital distribution rather than a dividend. While one is not a higher rate tax payer so the amount of HR tax due would be reasonably small, the other is a higher rate tax payer and would incur a substantial HR bill on the whole amount.
Is it worth applying to HMRC anyway and see what they say?

Are the insolvency comments on EU but not UK companies on Companies House web site relevant to voluntary winding up if this takes place in France?

Are the comments on HMRC website CTM36220 4th paragraph applicable to a french company? As far as I know it was never registered in UK.

Help would be gratefully received?
Mich¨le Doussot

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By AnonymousUser
12th Jun 2006 17:31

Off hand ...
... I can't imagine that ESC C16 can apply to a foreign company, as it relates to a company informally dissolved under s652 Companies Act which obviously cannot apply if the company is not UK registered. However, if the French company is being formally wound up in a manner equivalent to liquidation, the distributions in winding up would be capital anyway. Let me put it another way - distributions in respect of share capital in a winding up are not treated as income distributions under s209 ICTA 1988. I don't think 'winding up' is defined in the Taxes Acts, however if a foreign company has ceased to carry on business, has realised its assets and now wishes to distribute the surplus there ought to be some way that this is treated as capital. Obviously the procedures will be different but if that is what is happening you could invite HMRC's agreement that the payments are equivalent to distributions in a winding up. I can't imagine the local inspector knowing the answer and may have to refer to Head Office but this must be a fairly common occurrence so they must have come across before.

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