quick question about the Entrepreneurs Relief and related personal income tax...

[sbakoola]

quick question about the Entrepreneurs Relief and related personal income tax...

So say you have £200,000 in your Company Bank account (after VAT, PAYE and Corporation Tax have been paid off) and you qualify for Entrepreneurs Relief and pay a further 10% in Captial Gains Tax to HMRC leaving you with £180,000 in your Company Bank account.

When you transfer that £180,000 to your personal bank account as part of your entrepreneurs relief payment does it then qualify as further personal taxable income on top of the PAYE that you've paid yourself for the same year ? i.e. you will start to be taxed at the 40% and 50% personal income tax when you breach that threshold OR not ???????

thanks for any advice

(that includes you NorthernLadUK )

[Clare@InTouch]

ER is a personal tax, not a company one, so it works slightly differently......

You prepare final closure accounts for the company, paying off all CT, VAT and PAYE. A final capital distribution is then made to you of whatever is left. You declare that amount on your personal tax return as a capital gain, you then claim ER on it, and you pay 10% tax on it.

Income tax/PAYE won't have any bearing on it

[sbakoola]

ER is a personal tax, not a company one, so it works slightly differently......

You prepare final closure accounts for the company, paying off all CT, VAT and PAYE. A final capital distribution is then made to you of whatever is left. You declare that amount on your personal tax return as a capital gain, you then claim ER on it, and you pay 10% tax on it.

Income tax/PAYE won't have any bearing on it

Many thanks Clare, I'm going to see how my current accountant deals with any advice on Voluntary Liquidation (and to see how I can qualify for Entrepreneurs Relief) and if the advice is not forthcoming, I may well move to your accountancy firm.

[Clare@InTouch]

Many thanks Clare, I'm going to see how my current accountant deals with any advice on Voluntary Liquidation (and to see how I can qualify for Entrepreneurs Relief) and if the advice is not forthcoming, I may well move to your accountancy firm.

Excellent, let me know if there's anything I can do

The ER should be fine as long as you've been trading for a year, you own over 5% of the shares, and you're an officer/employee.

If the assets are under £25,000 then you don't need a liquidation. If they are over that, then you do (if you want CGT treatment). Liquidation costs can vary, so get a few quotes before you go down that route.