Any Answers Answered: Capital distribution on winding up and sole trader accounting date change

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This month, TAXtv hosts Tim Good and Giles Mooney get to grips with AccountingWEB member questions related to capital distribution on the winding up of a company and extending the accounting year end for a sole trader.

To watch the full video of Good and Mooney answering readers’ questions, click here or scroll down to the bottom of the page.

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Capital distribution on winding up

AccountingWEB member CW2012’s question relates to the treatment of a company their firm is looking to wind up:

“We have a client who has ceased to trade but is overdrawn as a director by circa £15k, the only other balance sheet entries are a small bank balance and a minor bit of cash. Can I wind the company up and treat the overdrawn loan account as a sub £25k distribution and claim the capital gains treatment?”

For Mooney, this question is about whether it is capital gains or, if they’ve already had the money, does the accountant have to acknowledge the £15,000 as a divided?

You can see Good and Mooney’s answer from around 35 seconds into the video.

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Change of accounting date sole trader

Reader E Lewis asked a question on extending the accounting year end for a sole trader:

“We have a client with a year end of 30 April. The last accounts prepared to 30/4/16 were submitted to HMRC on her 2017 tax return. She has never made much of a profit. In some years, she has barely reached her personal allowance. For various reasons, she would like to extend the date to 31/3/18, a period of 23 months.

“From what I understand, the period can't be extended longer than 18 months - to 31/10/17 and then no further changes can be made for five years. If we were able to extend the year end to 31/3/18, there would still be one-year end date in the 2018 tax year - changed from 30/4/17 to 31/3/18.”

Can E Lewis do this, or do they have to go back change the previous year (effectively) to make all this work?

Good and Mooney’s full answer to this can be viewed from 3m42 into the video.

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Full video

For the latest episode of TAXtv visit PTP Interactive. TAXtv is a monthly tax update programme available as an annual subscription from £199, (11 issues plus special editions) to view online, download from the internet or watch on DVD.

About Tom Herbert

Tom is editor at AccountingWEB, responsible for all editorial content on the site. If you have any comments or suggestions for us get in touch.

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