Hi
Ltd co (2 directors/shareholders) has just sold its business but directors still have control of the company. He is anxious to extract the money without any CT liability or personal tax liability. Is there an exgratia route to best pursue this since he will be winding the company up shortly.
They have drawn small salary and dividends in the past and have no employment/service contracts
Any do's or don'ts they look out for
Thanks
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No ex gratia
Firstly, the company will be liable to corporation tax on the chargeable gain arising from the sale of the business, as well as on the profits for the final period of trading, including any balancing allowances/charges on the sale of plant and machinery.
The company can then pay out the profits after tax by way of dividend with no further CT charge on the company. The shareholders would have no basic rate income tax to pay on the dividends, but if the dividends put them into higher rate tax, they would have to pay an extra 25% of the dividends.
Or if the retained profits after tax are less than £25,000, they could distribute them as capital proceeds, claim the annual exemption of £10,600 each and pay capital gains tax at 10% on the balance by claiming entrepreneur's relief.
Or if the retained profits are more than £25,000, they could get an insolvency practitioner to liquidate the company in order to claim the 10% capital gains tax rate.