esc c16

providing HMRC say you can

PC

The main advantage of appointing a liquidator is that you have closure, once the company has been wound up there is a two year period when it can be reinstated and then that is that. Not so with ESC C16, a company can be restored to the Register up to 20 years later.

I would also consider tax clearances as without these your shareholders may be looking over their shoulders for many years to come. You may find that HMRC is concerned by the size of the bank balance, a cash balance of that size appears (on the face of it) to be quite large and possibly surplus to trading requirements.

In the end it depends on the complexity of the case, and you know your client. I have written about this in more detail on my site, if you have registered for the news you will get the links tomorrow.

Virtual tax know how and practice support for accountants: www.rossmartin.co.uk

What does that have to do with ESC C16? (Not being rude, just curious, as  I've never seen it raised before)

Whilst it doesn't make any difference for ESC C16, it could make a difference to the rate of CGT that the shareholders have to pay - 10% for a business asset or 18% for a non-business asset.

But 18% is still better than 25% (or indeed 36.11%). I was reading Nichola's comment in the context of the rest of the paragraph which suggested HMRC clearances, implying that perhaps the size of the cash balance might cause a problem with C16 itself - I may have misinterpreted.

...3700k does it mean £3,700,000 or £3,700?

If the former,  a formal liquidation is surely called for so that ESC C16 would not be in point.

If the latter, the question might better have been put in terms of the limit on share capital below which the Treasury Solicitor will not insist on bona vacantia rights when a company is dissolved without being liquidated (as happens under the ESC C16 procedure).

The last time I looked it up the limit was still £4,000 so it looks like bona vacantia rights will not be an issue in the case in question if there are no assets other than £3,700 cash at bank. But there obviously could be a problem if the cash balance was £3,700,000 if the amount of share capital that would be distributed in the dissolution was more than £4,000.

ebenezer cuckpowder

1. My comment on surplus cash and ESC C16 was as an "anon" correctly observed was included because HMRC may deny ESC C16 if there is a whiff of tax avoidance and with so much cash floating around (assuming the questioner means £3,700,000) I would certainly be raising the issue with the company and want to know all about its background before I said "OK".

2. Surplus cash has nothing to do with bona vacantia. Bona vacantia covers the situation where you have undistributable reserves (if you come and subscribe to my webservice - go to "Companies" and "Ceasing trading" you will know that!) Sorry that is cheeky.

www.rossmartin.co.uk

The £4k limit is just on share capital though surely?  It would be possible to have a company with £3.7m in the bank but share capital of below £4k, so the C16 route would be available.

Share capital and capital reserves (non distributable reserves) are not distributable. So if you have £100k in bank and £100k in share capital + non-distributable reserves you cannot distribute them and if you strike the company off these are deemed to be the property of the Crown.

So, without looking at the balance sheet hard to tell if you can distribute all of the £3,700k as you may well have some non-dstributable reserves.

1. That is exactly what I said: "But there obviously could be a problem if the cash balance was £3,700,000 if the amount of share capital to be distributed in the dissolution was more than £4,000."

2. The question asked about "a maximum level" for "any company" to qualify for the ESC C16 procedure. If those words may be taken to include reference to the maximum level of the company's share capital, it can hardly be said that the £4,000 bona vacantia maximum level on share capital "has nothing to do with" the answer.

3. But if cash is £4,000 and share capital is £4,000 the whole amount may be distributed in a striking-off dissolution (even though strictly it is non- distributable)and the Treasury solicitor will not take the bona vacantia point.

ebenezer cuckpowder

PS: share capital for these purposes includes share premium and certain other non-distributable reserves

Just how many people reading this think that £3,700k means £3,700?

I must say that I take "k" to equal thousand, so therefore £3,700k means £3,700,000.

What did the questioner really mean?

I don't know.

Yes, on the face of it the amount is £3,700,000. But here's another straw poll - how many here would refer to that sum as £3,700k rather than, as I would, £3.7m? I think it's quite possible, though by no means certain, that the 'k' dropped in by accident.

PC

... I would suggest is the answer - well spotted on the 3/£ key! Are you a forensic accountant by any chance? ;)

PC

I have an editorial vacancy if you are interested!

So £700,000 in the bank eh? Well, I would still appoint an liquidator. You don't want to risk claims against the company many years down the line.