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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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.
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!
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
M: 07739 277275
L: https://gb.linkedin.com/pub/jamie-playford-mabrp-mipa/12/417/277