Completing capital gains pages (self assessment) - MVL and entrepreneur's relief

[oddsquad]

Quick question re completion of capital gains pages having liquidated business (via MVL), but distributions spread over two tax years (and two tax returns). When do you deduct the share capital (£100) from the gain - on first or second distribution?

For example, if the distribution was £200k in tax year 1, and final distribution of £100k in tax year 2, would you deduct the £100 share capital from the £200k, or the £100k. If year 1, the entries in the capital gains pages would be

Capital distribution £200,000
Less base cost/share capital £100
Capital gain £199,900
Less Annual Exemption £11,000
Taxable gain £188,900
ER CGT @ 10% £18,890

or would you deduct to the £100 from the second distribution (and therefore enter in the subsequent tax return), or does it not matter? Clearly not interested in the £10 tax saving, just want to enter the correct calculation.
Apologies in advance if obvious question/answer.
Thanks

[chopper]

What does your accountant say?

[Waldorf]

Not sure how you can have a capital distribution spread over two years? It is normally treated as one event and taxed in the year received.

If you have £300K why are you scrimping on paying an accountant £150 on getting it right?

[JB3000]

Quick question re completion of capital gains pages having liquidated business (via MVL), but distributions spread over two tax years (and two tax returns). When do you deduct the share capital (£100) from the gain - on first or second distribution?

For example, if the distribution was £200k in tax year 1, and final distribution of £100k in tax year 2, would you deduct the £100 share capital from the £200k, or the £100k. If year 1, the entries in the capital gains pages would be

Capital distribution £200,000
Less base cost/share capital £100
Capital gain £199,900
Less Annual Exemption £11,000
Taxable gain £188,900
ER CGT @ 10% £18,890

or would you deduct to the £100 from the second distribution (and therefore enter in the subsequent tax return), or does it not matter? Clearly not interested in the £10 tax saving, just want to enter the correct calculation.
Apologies in advance if obvious question/answer.
Thanks

You should deduct it against the first distribution.

Consequently there will be no cost to deduct on the second distribution.

If the two distributions are in different tax years (e.g. one on 5th April and the other on 6th April) you will get to enjoy two sets of tax free annual exemptions.

[oddsquad]

You should deduct it against the first distribution.

Consequently there will be no cost to deduct on the second distribution.

If the two distributions are in different tax years (e.g. one on 5th April and the other on 6th April) you will get to enjoy two sets of tax free annual exemptions.

Many thanks.

To the earlier replies ... No accountant as the one I had for my limited company stopped service a year ago when the business stopped trading, and I thought there might be an obvious answer to this, rather than trying to engage other accountant at this busy time before self assessment deadline of end Jan. My understanding is most MVL's have an initial distribution soon after appointment of the liquidator, and then a second once all liabilities have been settled or confirmed there are none, so thought someone else would have come across the same question. Maybe my situation is unusual in that those two distributions were in different tax years, although given the tax benefits (two sets of annual exemptions), presumed others would have experienced the same.

[Waldorf]

I would say that the capital gain event is when the company goes into liquidation, the tax based on the total sum, irrespective of when it was paid to you. However check with your accountant.

[oddsquad]

I would say that the capital gain event is when the company goes into liquidation, the tax based on the total sum, irrespective of when it was paid to you. However check with your accountant.

My old accountant kindly clarified that there is only a single disposal and therefore the total gain should be reported in the tax year when the majority of the proceeds are paid. Sorted.

To those that commented, thanks for taking the time to help.

[Maslins]

My old accountant kindly clarified that there is only a single disposal and therefore the total gain should be reported in the tax year when the majority of the proceeds are paid. Sorted.

As long as all the distribution proceeds are declared, I wouldn't be too concerned either way. My personal understanding is that each distribution counts as a separate part disposal...but I could be wrong.

[ContrataxLtd]

My old accountant kindly clarified that there is only a single disposal and therefore the total gain should be reported in the tax year when the majority of the proceeds are paid. Sorted.

To those that commented, thanks for taking the time to help.

Unfortunately oddsquad I think your old accountant is wrong based on the information you've provided. Where multiple distributions are made over a number of tax years each distribution is taxed in it's own right as a part disposal of the interest in the shares, you would need to apportion the base cost accordingly as per HMRC manual: Capital Gains Tax Procedures: Liquidations

The legislation that covers this I believe can be found on the following link: Taxation of Chargeable Gains Act 1992

Martin
Contratax Ltd