Deadline looms for ESC C16
Directors of small businesses who want to wind-up their company and distribute surplus funds to shareholders have just over two weeks to take advantage of a tax break.
The Extra-Statutory Concession 16 tax concession - whereby money from a wound-up company distributed to shareholders is taxed as capital gains rather than income tax – will be made less generous on 1 March.
Under the Enactment of Extra-Statutory Concessions Order 2012, passed earlier in February in the House of Commons, the favourable tax treatment will only apply to companies whose total distributions are no more than £25,000.
The £25,000 limit means that for many small businesses the easiest way to ensure that their distributions are still taxed as capital gains will be to enter a formal liquidation. But as the ICAEW Tax Faculty notes in a useful briefing on ESC 16 this can be expensive.
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How will it work
Sorry for seeming to ask a silly question, but how will the mechanics of winding a co up work now. Previously you would apply to HMRC under ESC16 then when get confirmation write to Companies House to get co struck off. With ESC16 now in statute, what do we do now? or is the process still the same but with a distributable reserves of now £25,000?