A company has a final balance sheet as follows and is closing down. There are two equal shareholders.
Fixed assets £2,000
Cash £43,000
Creditors (£20,000)
Net assets £25,000
Share capital £1,000
Retained profits £24,000
Total equity £25,000
A distribution for £24k is treated as a capital distribution (since this does not exceed £25k). So £12k each plus a repayment of capital of £500 each.
There is no CGT to pay since the gain is covered by the annual exemption. This disposal does not go on the tax return.
Please advise if this looks correct. I assume that the shareholders take the distribution as a combination of cash and the fixed assets (computers)? Thanks
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looks right to me, with 2 comments - fixed assets should be taken at market value not book value, CG pages on SATR might be required depending on other CG during the year (personally I always include a CG page even if below the annual exemption)
Also watch out for any distributions made in anticipation of striking off (paying a dividend to get it below 25k).
My understanding is that a return of capital is not a distribution, please would you expand on your point. Thanks
My point is that, legally, one cannot simply repay share capital. The practical treatment often overlooks the legalities though!
