I was hoping someone could clarify my understanding of the tax treatment of the sale of shares is correct or point out where I am going wrong:
Individual purchased shares in company A for £20k (60% of issued share capital) seven years ago, he also purchased shares in Company B for £10k (10% of issued share capital) at the same time. He was a Director of these trading companies from this date onwards.
2 years later he decided to set up a holding company and by way of a share for share exchange he transferred ownership of the above two companies so they were owned by his Hold Co say Company C. He owned 100% of company C, which did not own any other companies.
A further two years down the line, the shares held in Company B were sold by Company C for £20k resulting in a gain of £10k. Three months prior to this Company A had ceased to trade and had a share capital reduction, Company C therefore received its investment (in Company A) back of £20k back in full with no further monies received relating to Company A (The share capital went from circa 33,000 £1 shares to 100 £1 shares). The gain on the sale of the shares in Company B was subject to corp tax (SSE not available) and tax was paid at 20% of £10k.
Up until the above happened Company C had received some small dividend income and as a result of the above proceeds now has an overdrawn DLA of circa £18k following the payment of all liabilities. Basically the Director has emptied the bank account.
As this amount is less than <£25k can he apply to strike off the comapny and have the DLA distributed to him as a capital payment? If so, I assume I am required to send a tax clearance beforehand? In terms of his base cost for the shares in hold co (Company C) is this still the total of the purchase price of Company A & B when he purchased them as an individual so £30k in total, meaning no gain on the distribution of the DLA?
To further complicate things, he is now a sole trader carrying on the same trade as the above companies but from different locations so I hope this isnt an issue.
I hope that I have explained this well enough and provided the necessary facts!