Hi.
I am dealing with one of my clients who is going to sell his business and will be paying corporation tax on the gain. My question is how should he extract his
money out without further tax. He owns equally the company with his wife. should he pay dividends over 2 -3 years and then strike off the company. Please anybody can put light on the matter.
Replies (6)
Please login or register to join the discussion.
I think you must mean that your client's company is going to sell its business, not that your client is going to sell his.
The first response is that if possible the purchaser should buy the shares in the company from your client and his wife, rather than buying the business assets from the company.
The second response applies if the above is not possible. In that event compare the cost in tax and professional fees of withdrawing the reserves by dividends staged over a number of tax years with that of liquidating the company and having the proceeds treated as a capital gain.
No rules have changed and you can only have capital treatment on an informal winding up if reserves are under £25,000. Above that you need a liquidator.
What John said
So what I have gathered is if the gain(reserves) are more than 25k the the best way is to take out the money as dividends over 2-3 years period depending on their other income.
You can do the drip feeding dividends, but whether that's a good idea will depend upon their expected other income in the next few tax years, and professional fees for dealing with it. If their income will otherwise be negligible, this will likely be a good option. If they'll be higher rate taxpayers before these dividends, worth looking at a formal liquidation option. Our sister company MVL Online can do these for simple cash shells fairly affordably.
Like I said
So what I have gathered is if the gain(reserves) are more than 25k the the best way is to take out the money as dividends over 2-3 years period depending on their other income.
Not necessarily. Like I said do the figures to compare. If reserves are over £25k your calculations under the winding up route will need to factor in the liquidator's fee and disbursements.