Extraction of gain from a Company

Extraction of gain from a Company

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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)

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By johngroganjga
08th Sep 2014 08:26

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.

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Replying to paul.benny:
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By Hassan
08th Sep 2014 15:43

The buyer are not intersted to buy the shares as they want a fresh new company with no history. The gain will be in the region of 50k for assets & goodwill. There used to be a CS16 ( i think) where you could take out the money as capital ditributions without paying extra tax. I wondering if it still applies?

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By johngroganjga
08th Sep 2014 15:48

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.

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Replying to redleader:
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By Hassan
08th Sep 2014 15:54

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.

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Replying to TaxTeddy:
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By Maslins
08th Sep 2014 16:03

What John said

Hassan wrote:

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.

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Replying to TaxTeddy:
By johngroganjga
08th Sep 2014 16:13

Like I said

Hassan wrote:

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.  

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