Ltd Co. client emigrating - ER and MVL

H&W client with online business emigrating to Canada, continuing there. Retained earnings to extract

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H&W clients who run an online business through a Ltd Co. are emigraing back to their country of origin. They will continue the online business, currently being run through a UK Ltd Co, back home in Canada through a new company there. Being online, it will be quite a seamless transition for them.

Will have say £100k in retained earnings (prior to any sale of business assets) and business currently generates £100k net profit per annum.

I'm laying out my thoughts here:

(i) If the company sells the business assets (primarily revenue generating website) to the new Canadian company, it will be charged UK corporation tax on the gain. The website was internally created by the two directors, therefore no purchase price. With no purchase price and nothing to apply indexation to, then the entire amount received would be the gain (less any fees associated with the sale).

Any sale of business assets should be at market value between these related party companies.

(ii) Once the asset is sold, the UK company would cease trading and there would be an MVL. With say £100k in the bank to distribute, £50k each, and a CGT allowance of £11,300, then they would each be taxed at 10% on £38,700. 

Is my understanding correct on the above two points or am I missing anything significant or any opportunity? Any additional related party issues?

Thanks in advance

Replies (2)

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By Matrix
09th Jan 2018 22:12

I don't know how you would value the website so I will only comment on ii), wouldn't they wait until they are non-resident to sell the shares in the UK company? Obviously take Canadian tax advice on the sale before determining if this is optimal.

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Replying to Matrix:
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By StartUpAcc
09th Jan 2018 22:25

Thanks.

Yes they will definitely be getting Canadian tax advice. Just my initial thoughts if they dispose of shares via MVL while still UK resident - it's hard to think Canada will be much more attractive than the 10% ER and CGT allowance. But yes, I'll give the viewpoint here and then they can go away and review it with their Canadian advisor.

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