Distribution on cessation of trade

Distribution on cessation of trade

Didn't find your answer?

Company has £50K of distributable reserves, no creditors, two directors own 50 shares each. Director A is higher rate tax payer due to annual income received outside of company and director B a basic rate taxpayer. Company has ceased trading and looking to strike off. What is the most tax efficient way to extract these funds?

Replies (4)

Please login or register to join the discussion.

By johngroganjga
15th Sep 2014 13:11

You'll just have to work out the numbers to compare.

To get capital treatment there will have to be a formal liquidation with a liquidator.  So your calculation on that side will need to take the liquidator's fee into account. 

Thanks (1)
Replying to trust.pem:
Portia profile image
By Portia Nina Levin
15th Sep 2014 13:39

Yes but

johngroganjga wrote:

To get capital treatment there will have to be a formal liquidation with a liquidator.

A could sell some shares to B for their dividend worth, before a final income dividend is paid.

There is still some maths involved, so I'd suggest that the OP engage an accountant.

Thanks (0)
avatar
By pauld
16th Sep 2014 08:33

ESC16

I note ESC 16 has been replaced by CTA 2010 s1030A. If dividends are paid to leave £25,000 cash in the company. Is an election required to treat this £25K as a capital distribution following cessation of trade?

 

Thanks (0)
By johngroganjga
16th Sep 2014 08:43

Yes that was why I said that you would need a liquidator.

Any dividend paid in anticipation of the winding up would be added back in checking whether the £25,000 was exceeded.  So your plan to sidestep the requirement to appoint a liquidator does not work.

Presumably you have calculated that capital treatment is preferable?

If the reserves were under £25,000 you would not have to "elect" for capital treatment in any formal sense.

Thanks (1)