End of ESC C16 1/3/12.

[Mr_Z]

Does anyone know if the changes have been approved for definite now. If so for a company closing post 1st March with less than 25k is it definite that HMRC permission now not needed to treat as Capital?

Anyone know the answer to this?

[mark5y]

If the company is liquidated, the treatment as capital of the distribution is guaranteed.

Would this also apply to the liquidation of a limited company that's been dormant for several years? Would the capital gains tax rate be 10% or 28% in this scenario?

[MrRobin]

I have deleted this post as the info was wrong (see Nixon Williams post below instead)

[MrRobin]

Can the amount that you pay for the liquidator be paid from the company as a business expense?

I.e. if it costs £5,000, that's £1,000 off your CT bill

[Nixon Williams]

Would this also apply to the liquidation of a limited company that's been dormant for several years? Would the capital gains tax rate be 10% or 28% in this scenario?

The distribution would be treated as capital.

One of the requirements for Entrepreneur's Relief is that the company is or very recently been trading, if the company has been dormant for several years then clearly it fails this test and so the distribution would be taxed at 28% (assuming the receipient is a higher rate taxpayer).

Depending upon your income, it might be more efficient to distribute dividends (and pay tax at 25%) but leave sufficient to utilise the tax free capital gains allowance of £10,600.

Alan

[Nixon Williams]

The enactment document states that nothing changes for amounts smaller than £25,000 - i.e. I assume you will still have to apply for permission to treat the distributon as capital, just as before.

The 'application' was for approval to use the ESC C16 - as this will go, there is no need to 'apply' after 01/03/12, the tax treatment of the distribution will depend upon the cash amount etc.

As ever, use your accountant to do this, most will not charge a lot and it can save you a fortune if you do something in the wrong sequence etc.

Alan

[Nixon Williams]

Can the amount that you pay for the liquidator be paid from the company as a business expense?

I.e. if it costs £5,000, that's £1,000 off your CT bill

The expense will be part of the costs of liquidation, there is no corpoartion tax relief, although in effect you receive tax relief as the amount subject to personal capital gains tax will be lower due to paying the liquidation costs.

Alan

[MrRobin]

OK well in that case I have worked out this rough and ready calculation then:

Take the liquidation cost, multiply by 5 and add 25000.

If that number is MORE THAN your retained profit then take divs until 25k is left and the rest as capital.

If that number is LESS THAN your retained profit, then employ the services of a liquidator and take the entire amount as capital.

Assumes personal income of <£100k and higher rate tax payer

[Ruprect]

The expense will be part of the costs of liquidation, there is no corpoartion atx relief, although in effect you receive tax relief as the amount subject to personal capital gains tax will be lower due to paying the liquidation costs.

Alan

Will NW be providing liquidation services? If so, at what charge?

[Nixon Williams]

Will NW be providing liquidation services? If so, at what charge?

Nixon Williams will not be providing a liquidation service in-house.

We do expect to be able to direct clients to an insolvency practitioner at a cost expected to be around £3500, although we will strive to get this cost reduced.

Alan