Liquidation - when can director withdraw funds ?

Liquidation - when can director withdraw funds ?

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Hi Everyone,

 I have a client who is retiring on 31st December and then putting his company into liquidation.  By then he should have sold everything and just have around £500k in the company bank a/c.

He's just bought a house in S France and would like to use company money to pay for it before 31st Dec.The liquidator designate says this will be fine, but I'm not sure I agree - unless we pay a massive dividend, impractical for tax reasons, he won't have the money in his dirs.loan a/c. Or maybe this won't be an issue with the company ceasing ?

Another point is that he has to put around £5k aside for possible warranty claims. Will this be regarded as an expense of the company prior to liquidation, an expense of the liquidation, or something he will have to foot himself ?

Thanks

Replies (6)

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By johngroganjga
31st Oct 2015 15:28

The liquidator will deal with the provision for the warranty claims.

If your client can wait until after the liquidator is appointed I am sure that the liquidator can make an interim distribution, which will be taxed as capital. But otherwise I think the options are a dividend, taxed as income, or a loan, which is probably better than a dividend but clumsier than an interim distribution.

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By Eddystone
01st Nov 2015 17:28

Thanks, John, that pretty well echoes my thoughts although I hadn't really considered a loan.

It seems that the liquidator and director have come to an agreement re warranty work - the stuff's pretty hi-tech and the director thinks a few may 'try it on' once the company has ceased, so he wants to deal with any claims himself. So it seems this will be a liquidation expense and thus reduce the CGT / ER - not quite as tax effective as a CT cost !

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By JCresswellTax
02nd Nov 2015 09:18

ER

You better watch this with the autumn statement coming.  A wise lecturer said to beware as removing ER for one-man companies may be looked at.

Obviously know nothing about your client so may not be relevant, but if the £500k is built up reserves over a number of years for one-man consultancy company, you better be careful!

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By Eddystone
06th Nov 2015 00:14

Thanks for that, JC, but I think we should be ok here as this is a genuine trading company.

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Jamie Playford - Director and Licensed Insolvency Practitioner at www.leading.uk.com
By Jamie Playford
08th Nov 2015 10:39

Loan

As an IP, I regularly have clients that draw cash as a shareholder loan and I then distribute the loan in specie to shareholders in the later liquidation.

Also happy to provide free initial advice and a quote for the MVL if required.

Also good tip JCresswell will keep an eye out for that, certainly feels a possibility!

 

Jamie Playford MABRP MIPA

Leading Corporate Recovery

E: [email protected]

M: 07739 277275

W: www.leading.uk.com

L: https://gb.linkedin.com/pub/jamie-playford-mabrp-mipa/12/417/277

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By Eddystone
08th Nov 2015 18:12

Shareholder loan

Many thanks, Jamie, so it looks as though our liquidator designate was right, which is good news.

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