ESC C16
More of a discussion point than a question, and apologies if this has already been discussed but - in absence of any firm guidance on the point - I have a query about the proposed new legislation. (Treat this post as made after 1 March 2012).
The new legislation will apply, inter alia, where a company has applied, or intends to apply, to be struck off. That seems straightforward enough. So what happens if there are, say, £40k of distributable reserves? The legislation catches, if there is more than one, the aggregate of dividends falling within the legislation. So, if application has been made to strike off and a dividend, or dividends, totalling £40k paid the new legislation will catch the whole lot. Again, seems straightforward.
But what if application to strike off has not yet been made? The obvious solution would be to pay a dividend of £15,001, apply for striking off, and then distribute the balance - as a capital distribution. But at what point does a dividend stop being a 'normal' dividend and become a dividend in anticipation of a dissolution (so that it is taken into account in working out whether the £25k limit is breached)?
You did miss my point
Because under the new legislation - as I read it at least - if one pays a dividend of £15k and then a dividend of £25k, both will be taxed as income if the earlier one is treated as made in anticipation of dissolution.
Now we're getting somwhere
Though I'm not convinced about the interpretation of the plural. Normally when one talks about a distribution of profits, it means exactly that - a distribution of its profits amongst its shareholders, whatever the number of those shareholders.
I suppose we'll just need to wait and see what the explanatory notes and any HMRC guidance say on the matter.
ESC C16
As you say, previously the £40k would have be considered, by HMRC concession, to be a capital distribution. In terms of the timing, one would have declared the amount of the distribution to the inspector when writing to him/her when "providing ... certain assurances ... before the event" (to quote the original text of the concession.)
My reading is that from 1 March it will be the case that the timing of distributions becomes immaterial - because the inspector will not be able to allow any amount over £25,000 to be treated as capital. So whether the £15,000 is distributed earlier or later, it will in either case be treated as income.
I guess the only planning point is to make sure that you leave as close to the £25k as possible for treatment as capital.
What do you think? Did I miss your point?
Best wishes,
Du.