ESC C16 and Entrepreneur's Relief

[NastyNick]

Sorry, stupid question...

Are ESC C16 and Entrepreneur's Relief two different things?

Will Entrepreneur's Relief still be available after 1st March?

[Clare@InTouch]

Two different things. ER will still be available on capital gains. It's being able to take the final money as a capital gain in the first place that's changing.

[MrRobin]

BOTH will still be available from 1st March 2012.

However...

ESC C16 can only be used for capital distribution of £25,000 and under

Entrepreneurial relief is only available if you liquidate or sell your company. Liquidating requires the services of a qualified insolvency practitioner.

[Clare@InTouch]

BOTH will still be available from 1st March 2012.

However...

ESC C16 can only be used for capital distribution of £25,000 and under

Entrepreneurial relief is only available if you liquidate or sell your company. Liquidating requires the services of a qualified insolvency practitioner.

ESC C16 won't be around. All Extra Statutory Concessions are being made law, or abolished, and they've taken the opportunity to review and amend them if they are being kept. Therefore it won't be an ESC, it'll just be company law.

[Jeremiah@RHJAccountants]

ESC-C16 is gone from 1 March 2012 and is Company law.

If total distributions are under £25,000 then this will be treated as CGT (Capital Gain tax).

Distributions which are made on or after 1 March 2012 in anticipation of a dissolution and which exceed £25,000 will be subject to income tax and not capital gains tax.

The way to preserve capital gains tax treatment will then be to enter a formal liquidation but that may be a rather expensive exercise.

take a look at the link to a PDF doc from HMRC which does explan in more detail

www.hmrc.gov.uk/tiin/tiin-esc-c16.pdf

glad one of my clients managed to get their ESC-C16 application approved on 22 Feb 2012

[Nixon Williams]

Entrepreneurial relief is only available if you liquidate or sell your company. Liquidating requires the services of a qualified insolvency practitioner.

Entrepreneur's Relief will apply if certain conditions exist, it does not matter which method is used to close the company, either a formal liquidation or the new regime applying if the capital is not over £25,000.

The rate of Capital Gains Tax (CGT) on any disposal is dependent upon the individual’s income tax position. Where combined taxable income and gains fall within the basic rate brand of £35,000 the gains element will be taxed at 18%. Where that band is exceeded the CGT rate rises to 28%.

However, an important relief is available in the form of Entrepreneurs’ Relief (ER) which ensures that gains which qualify for the relief will only bear CGT rate of 10% on the first £10m of gain.

A long term plan to close the company means making sure that the right conditions are in place to minimise the capital gains tax (CGT) on the sale.

It is therefore important to ensure that as many shareholders as possible qualify for the relief.

Three basic conditions have to be satisfied in order for a gain on shares to qualify for Entrepreneur's Relief:

• The company must be a pure trading company or have insubstantial non trading activities
• The shareholder must have held at least 5% of the voting rights in ordinary shares in the twelve months leading up to the date of disposal
• The shareholder must have been an officer or employee of the company (not necessarily on a full time basis) again for the whole of the twelve months leading up to the closure.

Alan

[MrRobin]

Thanks for the clarification from the experts.

I meant that the method and tax relief permitted by ESC C16 would still be available after 1st March (for amounts up to £25k), even if it is no longer an 'extra statuatory concession'

[Greg@CapitalCity]

glad one of my clients managed to get their ESC-C16 application approved on 22 Feb 2012

Nice one, we had 10 approvals come through today.

[Jeremiah@RHJAccountants]

Nice one, we had 10 approvals come through today.

Well done i bet it put a smile on the clients face i know my client was very pleased

[NastyNick]

BOTH will still be available from 1st March 2012.

However...

ESC C16 can only be used for capital distribution of £25,000 and under

Entrepreneurial relief is only available if you liquidate or sell your company. Liquidating requires the services of a qualified insolvency practitioner.

Thanks for all your replies.

If I use voluntary liquidation will this affect my credit record, ability to get a mortgage, ability to work in finance?