BADR and Spouse (with 50% Shares)

[scldn]

Hi, my spouse and I are directors and shareholders of an LTD company. She stopped contracting some time ago and we have a substantial amount of money in our business account. I plan to close the company within 3-5 months when my current contract ends.

Would it be possible for my wife to withdraw from the company before April, take half of the assets and pay only 10% tax?

[Snooky]

AFAIK, BADR is only applicable on distributions made as part of a members' voluntary liquidation. Prior to that any money a shareholder takes will likely qualify either as a director's loan or a dividend, depending on whether it's repaid.

It sounds like your company will still be trading after April. My experience of MVL is very limited, but IIRC my liquidator needed the company to be virtually dead - inactive, all taxes paid, deregistered for PAYE, Corp Tax and VAT, ideally with no outstanding credits or debts - before any distribution was made.

So it sounds like the answer is probably no, but perhaps an expert like Maslins might be willing to share their thoughts.

[scldn]

Thanks Snooky

I checked the eligibility page, and it states that selling your shares could qualify you for Business Asset Disposal Relief (BADR):
www.gov.uk/business-asset-disposal-relief#if-youre-selling-all-or-part-of-your-business

I was wondering if a "company share buyback" might be a viable option. From what I understand, this involves a shareholder selling their shares back to the company itself (rather than to another individual). This would allow the shareholder to withdraw funds from the business accounts in proportion to their shareholding.

However, I’m not entirely sure if I’m missing any key details or considerations. That's why I thought I'd ask here for some expert views.

[northernladuk]

However, I’m not entirely sure if I’m missing any key details or considerations. That's why I thought I'd ask here for some expert views.

The problem is you are not asking experts. You are asking a bunch of contractors that may have either done the same or have a vague interest in tax affairs. We do have a few accountants that post from time to time but if you really wanted an expert opinion it would probably be better on accountingweb or better still speak to your accountant or a friendly MVL company. I'd suggest you either have a good sit down with your accountant or ring Chris Maslin at MVL Online as he will probably have seen this time and time again so can give you some direction.

Maslins Can you help here?

[Maslins]

If you're still trading for another few months, an MVL now isn't an option for you.

The thought crossed my mind about a share buyback...but that's one to ask your accountant. Whether they'd be confident advising and helping you through it is another matter. It's not a particularly common thing to do, and the HMRC hurdles to get the tax treatment you want are relatively high. EG you certainly can't just sell a few shares back every year for a modest capital gain covered by annual exemption!

14% isn't that much higher than 10%...so potentially trying to do anything fancy now is more trouble than it's worth.

[scldn]

Thanks, Maslins. My accountant doesn’t seem too confident about it either. The 10% vs 14% point is a fair one — I think I’ll just leave things as they are for now.