Reply to: CGT at LTD strike off

[Chart Accountancy]

Hi all,

Question,

if you have say £34 000 in your LTD and want to strike it off (solvent) is this the calculation. 2 owners 50/50 shares, basic rate tax payers:

£24000 allowed free of CGT (2x12000)
£10000*10%= £1000 CGT (2x5000)

Accountant corona-ed.

If the retained profit is £34K at the strike off, then the full amount is taxed as dividends. The £25K cap applies only on the final distribution in "anticipation of dissolution". If you have £34K, you should declare a dividend within the final trading period to leave under £25K retained profit. If after you ceased trading you had over £25K retained profit, you cannot access the capital distribution treatment unless you go via MVL.

[Lance]

I couldnt find CGT @ 20%, where is that defined?

1st link in a google search brings up this.

Capital Gains Tax: Capital Gains Tax rates - GOV.UK

[northernladuk]

You are entitled to your opinion, but is it useless and dont bring any value into the thread. Ergo it is just trolling.
Oi admin!

@Anamnesia: thanks, got it.

Trolling? Honestly? Whatever.

You keep flailing around. I'm sure you'll get somewhere near a solution in the next couple of pages.

[WTFH]

You are entitled to your opinion, but is it useless and dont bring any value into the thread. Ergo it is just trolling.
Oi admin!

@Anamnesia: thanks, got it.

Based on your history of posts on here, NLUK is not the one who is trolling.

[abz2020]

Kind of but the OP is missing some fundamental points and situation is slowly moving forward rather than him having a good discussion about all the options and variables. He's asking questions but still no closer to the solution. I think, in this particular case, he needs a much rounder approach to his problem rather than firing off questions base on answers based on questions.

It's a lot of money he's talking about here so surely a more belt and braces approach is needed

You are entitled to your opinion, but is it useless and dont bring any value into the thread. Ergo it is just trolling.
Oi admin!

@Anamnesia: thanks, got it.

[northernladuk]

These seem like perfectly reasonable questions to me. I'm not sure why everyone should always ask their accountant first - much quicker and easier to get simple answers to simple questions elsewhere. Naturally just use anything anyone says here as initial guidance for exploring ideas rather than treating it as gospel.

To answer the OP:
- Yes, you can get capital treatment on a strike-off, as long as the total distributed amount is no more than £25k.
- If it's more than £25k, you'll need an MVL to get capital treatment.
- If it's marginally over £25k, the whole lot gets treated as income - there's no split between part-income and part-capital.
- Just take the excess as a dividend and get the amount down below the limit.
- Strike-off potentially has other benefits - it's a lot cheaper than an MVL, and the anti-phoenixing TAAR doesn't apply.
- There are some risks to a DIY strike-off, though - make sure you distribute at the right point in the process (Google "bona vacantia"...)

Kind of but the OP is missing some fundamental points and situation is slowly moving forward rather than him having a good discussion about all the options and variables. He's asking questions but still no closer to the solution. I think, in this particular case, he needs a much rounder approach to his problem rather than firing off questions base on answers based on questions.

It's a lot of money he's talking about here so surely a more belt and braces approach is needed

[Amanensia]

These seem like perfectly reasonable questions to me. I'm not sure why everyone should always ask their accountant first - much quicker and easier to get simple answers to simple questions elsewhere. Naturally just use anything anyone says here as initial guidance for exploring ideas rather than treating it as gospel.

To answer the OP:
- Yes, you can get capital treatment on a strike-off, as long as the total distributed amount is no more than £25k.
- If it's more than £25k, you'll need an MVL to get capital treatment.
- If it's marginally over £25k, the whole lot gets treated as income - there's no split between part-income and part-capital.
- Just take the excess as a dividend and get the amount down below the limit.
- Strike-off potentially has other benefits - it's a lot cheaper than an MVL, and the anti-phoenixing TAAR doesn't apply.
- There are some risks to a DIY strike-off, though - make sure you distribute at the right point in the process (Google "bona vacantia"...)

[northernladuk]

I think a good discussion with your account in order. We keep answering your questions but you aren't learning anything if thst makes sense.

[abz2020]

Be aware with £34k final net assets a strike off would lead to dividend tax treatment on those funds for the shareholders. You'd need to put the company through a members voluntary liquidation (MVL) to gain capital gains tax treatment.

If you do go through an MVL, then yes your calculations are plausible. Do check with your accountant that for example both you & other owner benefit from ER, won't otherwise use annual exemption etc.

The one thing I was not sure about: Can one get CGT treatment when doing a strike off? Or it is only when doing MVL? Seems the latter. Please reconfirm.
And in the example above will 24000 of these 34000 be tax free for CGT and the 10 000 treated as divi? Or all 34000 as divi?

[Maslins]

Be aware with £34k final net assets a strike off would lead to dividend tax treatment on those funds for the shareholders. You'd need to put the company through a members voluntary liquidation (MVL) to gain capital gains tax treatment.

If you do go through an MVL, then yes your calculations are plausible. Do check with your accountant that for example both you & other owner benefit from ER, won't otherwise use annual exemption etc.

[ChimpMaster]

I couldnt find CGT @ 20%, where is that defined?

I was assuming you would be a HRT payer in the year but maybe not.

[Patrick@Intouch]

You'll also need final accounts preparing and submitting to HMRC along with CT600, plus VAT and PAYE final submissions and deregistrations if you're registered and then will need to apply the correct treatment to your personal tax return in the correct period.

Accountant recovered - yay!

[abz2020]

20% CGT unless you are claiming ER@10%.

Seems pointless doing what you're doing. Get the Company funds down to £25k and life will be easier.

I couldnt find CGT @ 20%, where is that defined?

[northernladuk]

The question is, is that the right calculation

But that's not a question either

[ChimpMaster]

20% CGT unless you are claiming ER@10%.

Seems pointless doing what you're doing. Get the Company funds down to £25k and life will be easier.