Our client company (A) has a number of shareholders. It has stopped trading and sold its assets. One shareholder is a company (B) the other 3 are individuals. The company has a small share capital and substantial distibutable reserves. Company A no longer has any purpose and wants to return funds to the shareholders and wind up.
The individual shareholders want capital treatment but the corporate shareholder B would like a dividend as it would pay no further CT on that.
One plan was for company A to purchase its own shares held by the individuals for cancellation, then pay company B the maximum dividend it could and then wind up with company B getting the rest of its money a capital.
My concern is that the individual shareholders might not get the capital treatment as a share buy back as to be for the benefit of the trade to avoid it being taxed as a distribution.
Before I apply for clearance does any one have a view on this?
Thanks,
Roger
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ESC C16 ?
It may be worth considering going down the ESC C16 route. If HMRC give clearance then the individual shareholders should get CGT treatment on the distribution. The corporate shareholder may be able to benefit from the substantial shareholding exemption and have a tax free receipt - this will depend upon the various conditions being met and would need to be looked at.
Let me know if you need any further assistance with this.
Craig