Reply to: MVL with physical assets

[TheCyclingProgrammer]

How about leaving the assets in the company at closure so that they become bona vacantia and pass to the crown. What happens after? Will the Queen come to take the old laptop?

Presumably you'd need to find an MVL practitioner willing to leave such a mess behind - unlikely.

In reality the idea of writing off the assets and treating them as scrapped would probably be fine in practice, but it also leaves you vulnerable to a challenge by HMRC and I'd like to leave things neat and tidy when I close my business down.

[Paralytic]

How about leaving the assets in the company at closure so that they become bona vacantia and pass to the crown. What happens after? Will the Queen come to take the old laptop?

if she turns up at your door, tell her she's currently not allowed in to pick it up, but that you'll meet her down the park (she can bring 4 friends) and you can hand it over there.

[michaelC]

my suggestion was tongue in cheek.
And you can't simply write off an asset like that. I'll buy your 1 year old Macbook off you. So it isn't worth nothing.

How about leaving the assets in the company at closure so that they become bona vacantia and pass to the crown. What happens after? Will the Queen come to take the old laptop?

[Lance]

Exactly this. Unfortunately the macbook and rest of stuff kicked the bucket after 1 year and are no longer covered by the manufacturer's warranty. So they have to be written off.

my suggestion was tongue in cheek.
And you can't simply write off an asset like that. I'll buy your 1 year old Macbook off you. So it isn't worth nothing.

[michaelC]

what if they *cough* broke? They would be worth nothing, and you could dispose of them for no monetary transaction.

Exactly this. Unfortunately the macbook and rest of stuff kicked the bucket after 1 year and are no longer covered by the manufacturer's warranty. So they have to be written off.

[Pmidas]

Can anyone recommend an MVL company that doesn't cost a fortune that can deal with liquidations that involve cash + capital assets? I wanted to use MVL Online but they only deal with cash.

MyCo has a number of capital assets on its books that still have some market value - possibly around £5k in total. I want to keep these and my accountant is telling me that I would need to sell them to myself and that it should be a cash transaction rather than a paper one as I can't leave a balance on the director's loan account.

It seems pretty ridiculous to me that I would need to raise an invoice and sell these things to myself - meaning I'd need to account for VAT on the sales and also balancing charges for capital allowances purposes, when I could just take ownership of them as part of the overall capital distribution and just pay 10% CGT on their value instead.

Speak with Frost - Julie or Jeremy frost.. they do Distribution In Specie

[Maslins]

So with that in mind the tax position is similar to me raising an invoice and selling them to myself, assuming I deregister for VAT before selling them, is that right?

Yes. As you've found out there's not really any need for physical cash to change hands, but there isn't scope to avoid CT/VAT by distributing things in specie instead of selling. VAT you may be able to sidestep by virtue of being below the de minimis when you de-register.

[TheCyclingProgrammer]

So reading up on this some more it seems that assets can be distributed in specie instead of being sold back to me, however:

* There’s no avoiding the corporation tax charge as it still counts as a disposal and a balancing charge needs to be calculated.
* I should be able to just deregister for VAT (as I will need to do this anyway) and because the total VAT due on the market value wouldn’t exceed £1000 I wouldn’t need to account for VAT on deregistration, so I would at least save there.

So with that in mind the tax position is similar to me raising an invoice and selling them to myself, assuming I deregister for VAT before selling them, is that right?

[TheCyclingProgrammer]

So you as the expert puts a value on it and no one else can question it because it's so difficult to get a reasonable one. If your expert opinion is a little high then so be it

I'm just trying to do the right thing, whilst remaining tax efficient. I'm not trying to pull a fast one and fiddle the estimates as some others may have suggested. We're not talking anything serious here...an 18 month old iMac Pro, some relatively new mobile devices, an office aircon unit etc. Probably no more than £5k worth of assets. I'm excluding things of likely negligible value like my old desk, storage furniture etc.

If these things can be distributed in specie at value then I'd rather pay 10% CGT on that value than have to account for VAT and CT and then CGT on the balance, obviously - it would save about £1500. That would obviously have to be weighed up against the cost of the MVL compared to some cheaper offers. Various articles suggest this can be done, comments on here suggest it can't, I'm just looking for an explanation of what I'm missing.

[northernladuk]

Estimated market value, although its not entirely clear how I'd go about getting a reasonable estimate for some of the items.

So you as the expert puts a value on it and no one else can question it because it's so difficult to get a reasonable one. If your expert opinion is a little high then so be it

[TheCyclingProgrammer]

I'm unsure why you think that's ridiculous? Your company bought some equipment, which it obtained tax relief on. It now no longer needs that equipment, but it still has significant value. It's found someone happy to take it (you), so it sells it on suffering tax on the sales proceeds. You can't legally avoid that VAT/CT by making it a liquidation distribution. No different to your company can't just buy lots of cool stuff, reclaim VAT/CT, then the next day do it as a dividend in specie of the net of tax value to the shareholder.

I'm clearing missing something obvious here, but I thought the whole point of a liquidation was to distribute a company's assets to it's shareholders. Why is the company required to sell those assets to the shareholders instead?

Quoting from https://www.armstrongwatson.co.uk/ne...ry-liquidation

In addition, assets can be distributed to shareholders without the need to realise them for cash. For example, there may be motor vehicles or computer equipment that the shareholders wish to keep once the business ceases to trade. The Liquidator can distribute these “in specie” to the shareholders thereby negating the requirement for them to be sold or bought back by the shareholders.

I took this to mean the assets would be distributed to the shareholders and for CGT purposes their value would be the fair market value of the assets. I can't see anything regarding having to account for capital allowances or VAT and why would you if they aren't actually sold?

[TheCyclingProgrammer]

What's ridiculous - an expert's correct view on how to proceed or the taxation laws that make it necessary?

As for the price, are you looking at market value or depreciated value?

Estimated market value, although its not entirely clear how I'd go about getting a reasonable estimate for some of the items.

[Lance]

Can anyone recommend an MVL company that doesn't cost a fortune that can deal with liquidations that involve cash + capital assets? I wanted to use MVL Online but they only deal with cash.

MyCo has a number of capital assets on its books that still have some market value - possibly around £5k in total. I want to keep these and my accountant is telling me that I would need to sell them to myself and that it should be a cash transaction rather than a paper one as I can't leave a balance on the director's loan account.

It seems pretty ridiculous to me that I would need to raise an invoice and sell these things to myself - meaning I'd need to account for VAT on the sales and also balancing charges for capital allowances purposes, when I could just take ownership of them as part of the overall capital distribution and just pay 10% CGT on their value instead.

what if they *cough* broke? They would be worth nothing, and you could dispose of them for no monetary transaction.

And I think a is in order. Thinning the herd.

[northernladuk]

It seems pretty ridiculous to me that I would need to raise an invoice and sell these things to myself - meaning I'd need to account for VAT on the sales and also balancing charges for capital allowances purposes, when I could just take ownership of them as part of the overall capital distribution and just pay 10% CGT on their value instead.

I'm surprised at this.. What you say might make sense your situation but the process isn't tailored to that situation and it's going to be a very small number of people and cost that this applies to.

Normally its a large faceless company with a number of names in the background so the only proper way forward is convert the assets in to cash and then distribute. Seems pretty simple to me and I can't see what's ridiculous about it at all.

[Maslins]

I'm unsure why you think that's ridiculous? Your company bought some equipment, which it obtained tax relief on. It now no longer needs that equipment, but it still has significant value. It's found someone happy to take it (you), so it sells it on suffering tax on the sales proceeds. You can't legally avoid that VAT/CT by making it a liquidation distribution. No different to your company can't just buy lots of cool stuff, reclaim VAT/CT, then the next day do it as a dividend in specie of the net of tax value to the shareholder.

No reason why you can't do it via the director loan account (still accounting for VAT/CT). However where that leaves a director loan account on the balance sheet, it might impact which liquidators are happy to take it on/what they'd charge due to the minor additional complication.