cash left on closing down business

[achillea]

Please can someone explain in plain english what the tax implications are on closing down a company and taking out the remaining cash?

We have 2 directors, limited company 3.5 years old. If we CLOSE the company down (nothing to sell) post April, what happens to the cash left in the business?

Does each director pay entrepreneur's 10% capital gains or do we split it as dividend and each pay personal CGT of 18%?

If the former, is there any downside to stockpiling cash in the business before selling?

Sorry, I've trawled through the forums and not found a simple answer to this question!

cheers

[ratewhore]

Speak to your accountant.

FWIW, I have just closed down a company and I have the IR go-ahead to take the remaining balance as capital, following the existing mechanisms for taper relief. I followed my accountants advice as thats what I pay them for...

[tim123]

Please can someone explain in plain english what the tax implications are on closing down a company and taking out the remaining cash?

We have 2 directors, limited company 3.5 years old. If we CLOSE the company down (nothing to sell) post April, what happens to the cash left in the business?

Does each director pay entrepreneur's 10% capital gains or do we split it as dividend and each pay personal CGT of 18%?

If the former, is there any downside to stockpiling cash in the business before selling?

Sorry, I've trawled through the forums and not found a simple answer to this question!

cheers

Are you asking: Should you shut this down before or after April?

Assuming the revenue allow this as a qualifying company disposal (which I don't think changes after April)

With a 3.5 year old business you will get 75% taper relief and hence pay 10% on the distribution before April.

You will get entrepreneur's relief if you shut down after April, but the calculation is not that you pay 10% tax on everything under a million and on most number you will pay more than now.

It really depends upon how much you are distributing.

If the revenue don't allow this as a qualifying disposal and you have to distribute the money as a dividend, you will pay CT (plus the Higher rate surcharge if applicable) as this is income, not capital gain.

HTH

tim

[Crossroads]

If the revenue don't allow this as a qualifying disposal and you have to distribute the money as a dividend, you will pay CT (plus the Higher rate surcharge if applicable) as this is income, not capital gain.

You're going to pay / have paid CT regardless. The saving is that 10% (or even 18%) CGT is preferable to 25% effective on dividends.

[ASB]

Please can someone explain in plain english what the tax implications are on closing down a company and taking out the remaining cash?

We have 2 directors, limited company 3.5 years old. If we CLOSE the company down (nothing to sell) post April, what happens to the cash left in the business?

Does each director pay entrepreneur's 10% capital gains or do we split it as dividend and each pay personal CGT of 18%?

If the former, is there any downside to stockpiling cash in the business before selling?

Sorry, I've trawled through the forums and not found a simple answer to this question!

cheers

Nobody actually knows. What you can actually be reasonably sure of is that this revision is intended to raise more CGT. Differing rates etc are simply a sop to those people who wouldn't generally have any significant gains.

My bet would be that there are NO circumstances where tax payable will be less post April as a result of company close-down or disposal.

[tim123]

My bet would be that there are NO circumstances where tax payable will be less post April as a result of company close-down or disposal.

You're probably right.

There are however (hundreds of) thousands of BTLers who will pay less tax than under the old rules.

Methinks he should have left well alone. On second thoughts, he should have put the business taper relief back up to 4 years like it was originally. Frankly, 10% tax after two years of ownership is just toooooooooooooooo generous.

tim

[THEPUMA]

Nobody actually knows. What you can actually be reasonably sure of is that this revision is intended to raise more CGT. Differing rates etc are simply a sop to those people who wouldn't generally have any significant gains.

My bet would be that there are NO circumstances where tax payable will be less post April as a result of company close-down or disposal.

Of a typical personal service company agreed. But those who have accidentally strayed into investment company territory will be better off.