Share this content
0
934

Entrepreneurial relief

claiming entrepreneurial relief

HS275 and CG64055 are leaflets/legislation about claiming ER and the conditions surrounding such claims.  These specifically mention capital distributions.

So if the relief is claimed within the CGT pages (property/assets and other gains) then somehow must enter date(s) of acquisition/cost or market value to give a total costs figure.

However, if  capital distributions are cash then disposals must be at no gain/loss: or is cash /bank balances) specifically excluded from a claim -if so where within the legislation is this specifically written as I can't see it (I dont think it is though?)  Thank you in anticipation of replies..

Company is being wound up, shares will not be sold and entrepreneurial relief claim will surround the withdrawals of cash (sole asset of he company) from the bank account.

 

Replies

Please login or register to join the discussion.

avatar
24th Apr 2018 18:47

I hate it when people call it "Entrepreneurial Relief"

Thanks (2)
avatar
to AnnAccountant
25th Apr 2018 08:34

Yes you are right. Thank you. I would agree it was poor spelling.

Thanks (0)
24th Apr 2018 19:07

I am not sure what your question is. The gain to which ER may be applicable is the gain your client makes on his shares - essentially the liquidation proceeds less what he paid for them. You seem to be looking at gains in the company rather than in the hands of your client.

Thanks (0)
avatar
to johngroganjga
25th Apr 2018 08:43

Therefore, if there is a sum of money left in the company-say £60K for arguments sake-then the gain subject to entrepreneurs' relief is this amount less what was paid for the shares at company formation eg £100.
Also, the extractions occurred in 2017-18 and will again finally 2018-19. is it correct they are not linked in the sense that claims for ER are made in each tax year rather than one-or am I wrong?
Finally, as usual your reply is succinct and to the point and I thank you for this. I am, regretfully, rather verbose.

Thanks (0)
avatar
to davidbarry
25th Apr 2018 08:52

I think I might be seeing a mistake her in my argument -I am not sure.
If there are bank cash withdrawals each month in tax year 2017-18 and a final distribution in 2018-19 then am I able to treat withdrawals 2017-18 as ER in tax return 2017-18 and the final distribution 2018-19 as ER in future tax return 2018-19? Thank you.

Thanks (0)
By mrme89
to davidbarry
25th Apr 2018 09:14

Are you saying that there were a number of director loans that were later cleared by a dividend? And that you now want to treat that as a capital distribution?

Thanks (0)
to davidbarry
25th Apr 2018 09:46

If the reserves exceed £25,000 there will need to be a formal liquidation for capital treatment to apply. Unless capital treatment applies your concern about ER is academic. Do the reserves (before deducting any distributions that may be held to have been made in anticipation of the liquidation) exceed £25,000, and if so is a formal liquidation taking place?

Thanks (0)
avatar
to johngroganjga
25th Apr 2018 10:16

Facts: In tax year 2017-18 accounting period after 29092017 the client withdrew regular amount from the bank account from a position of £50000(reserves in excess of £25000) to £21000( reserves less than £25000.)
Question:Does not having a formal liquidation for capital treatment at the position of £50000 preclude me from claiming ER relief and can only be claimed now?
The plan is to withdraw all remaining bank balances followed by filing DS01 at Co Hse. There are no creditors and one fixed asset of negligible market value.

Thanks (0)
to davidbarry
25th Apr 2018 10:23

On those facts you need a formal liquidation for capital treatment to apply. If you are going to argue that the withdrawals to date were not distributions in anticipation of the winding up you will not win.

Thanks (0)
avatar
to johngroganjga
25th Apr 2018 10:39

Thank you John. I did argue for a formal liquidation at the time but I was not listened to. Now that the reserves are less than £25K am I right in assuming that the balance extracted now-some £21K can be withdrawn now and ER claimed tax year 2018-19?
Also, when you say that I cannot win is this based on previous tax cases of which you are aware/interpretation of the legislation or is it to do with what was in the mind at the time of withdrawals? Thank you.

Thanks (0)
to davidbarry
25th Apr 2018 10:50

When you advised on a formal liquidation did your advice include an explanation of the tax saving that would follow from it? If so, you are in the clear and the problem is your clients’.

No your assumption is not right unless you think you can win the argument that the withdrawals to date were not in anticipation of the winding up.

Thanks (0)
avatar
to johngroganjga
25th Apr 2018 11:34

Yes, I did. I was in contact with a liquidator and send the client copies of all correspondence . Client did not want to at the time. Now wants the money out and rid of the company. Company has not traded for 12 months.
thank you John, though, for your concern. It is much appreciated.
Do you think that I can at least claim ER on the final distribution though?

Thanks (0)
to davidbarry
25th Apr 2018 11:56

You don’t seem to have read my previous responses. Without a formal liquidation all the withdrawals will be taxed as income, at the dividend rates. It may not be too late for your clients to change their minds.

Thanks (0)
avatar
to johngroganjga
26th Apr 2018 08:18

Okay. Do you know of a liquidator with whom you can put me in touch.
regards,

Thanks (0)
avatar
to davidbarry
26th Apr 2018 08:48

davidbarry wrote:

Okay. Do you know of a liquidator with whom you can put me in touch.
regards,

Why not use the one you've been in contact with?

Thanks (0)
25th Apr 2018 08:43

What makes you think cash would be no gain/no loss? As it certainly wouldn't.

This is definitely one for your accountant!

Thanks (0)
avatar
to northernmonkey
26th Apr 2018 08:29

The OP is an accountant, albeit a sole practitioner (no offence meant, I merely mention as he may have no one else to ask).

Thanks (0)
avatar
By Matrix
26th Apr 2018 08:37

What is your client's marginal tax rate this year? Have dividends actually been declared in 2017-18 or not?

Thanks (0)
Share this content