Closing Company

[Nixon Williams]

Do you have to pay 10% on the final capital distriibution ? Also is there any personal tax to be paid on this money ?

Assuming that the ESC16 claim is aproved, and that you meet the criteria to qualify for Entrepreneur's Relief, then yes effectively you would pay 10% of the funds, although remember that for 2009/10 you have an allowance of £10,100 for capital gains, so in effect the % will be less than 10%!

This tax is paid personally, it has nothing to do with the company. The tax will be calculated on your personal tax return and paid across with any other taxes that may be due.

Alan

[Nixon Williams]

And one more question that my accountant seems unable to answer...

Is there any reason why I can't take some of the remaining funds as a pension contribution before starting the closing process. (nothing excessive, just similar to previous years)

I stopped being on the payroll at the end of March if that makes a difference

Thanks

It is possible, although I am unable to give more specific advise as I am not aware of all the details of your circumstances. I would suggest you talk to your accountant and discuss it.

Alan

[Andy2]

Do you have to pay 10% on the final capital distriibution ? Also is there any personal tax to be paid on this money ?

[Limited]

And one more question that my accountant seems unable to answer...

Is there any reason why I can't take some of the remaining funds as a pension contribution before starting the closing process. (nothing excessive, just similar to previous years)

I stopped being on the payroll at the end of March if that makes a difference

Thanks

[Limited]

I guess my intentions are fairly clear as I'm already working for the same clients through a different company (having created a new company with another contractor).

That seems straightforward then. The retained profit will be taken as dividends, my accountant only gets the big cheque for closing the company and not the the one for capital distribution.

Thanks again for your help

[Nixon Williams]

Thanks Alan. That's less than half what my accountant has quoted. I guess it's one of the reasons why the new venture is using a different accountant.

Can I ask if you would also charge extra for organising the capital distribution? I'm being quoted a simliar charge on top for doing that.

Also, if I carry on working for the same customers under a different company does that necessarily prevent me taking the capital distribution. If not, why don't contractors just close their companies every year or two?

The fee includes everything, including the capital distribution etc. I should say that this fee is to existing clients, we do not generally take a new client on just to close the company for them.

By applying for the concession to close, you declare that you do not intend to carry on in business, so this is not an option, although we are aware that some "accountants" suggest this route!

A matter for debate would be your meaning of "intend" - you could close the company and not intend to start a new one, but circumstances do change, it is an area to be acreful about however.

Alan

[Limited]

Thanks Alan. That's less than half what my accountant has quoted. I guess it's one of the reasons why the new venture is using a different accountant.

Can I ask if you would also charge extra for organising the capital distribution? I'm being quoted a simliar charge on top for doing that.

Also, if I carry on working for the same customers under a different company does that necessarily prevent me taking the capital distribution. If not, why don't contractors just close their companies every year or two?

[Nixon Williams]

Can anyone give me some idea of what I should be paying to an accountant for closing a company? This would be after this year's year end has been completed so there will be no trading in the final year.

I've had a quote for an additional fee for taking the funds as a capital distriibution on closing the company. I can't seem to find any information as to whether this is a non-starter or not. I'm continuing to work for some clients but through a different company which would make me think that it can't (or shouldn't) be done.

Thanks

We would normally charge £120+VAT and this would also cover any future queries that may arise, even if it was in two years time!

Closure of the company can be done to coincide with the year end date, however if you wish to speed up the process then the year end date can be changed.

The first step will be to prepare final accounts for the company and calculate a final corporation tax liability. The accounts will be submitted to HMRC as usual for their agreement, and a copy will be filed at Companies House.

Any remaining assets of the company will probably be cash and there are two ways that this may be distributed to the shareholders, either as a dividend or a capital distribution.

The best method would depend upon your own personal tax situation.
With a capital distribution taxed as a Capital Gain you may wish to take advantage of this method and utilise your personal Capital Gains Tax exempt limit of £10,100 (2009/10). This could mean that the extra tax on the funds is as low at 10%, but you should seek advice before proceeding as each case can be different.

Application must first be made to HMRC before the company is actually closed and struck off at Companies House.

Alan

[Limited]

Can anyone give me some idea of what I should be paying to an accountant for closing a company? This would be after this year's year end has been completed so there will be no trading in the final year.

I've had a quote for an additional fee for taking the funds as a capital distriibution on closing the company. I can't seem to find any information as to whether this is a non-starter or not. I'm continuing to work for some clients but through a different company which would make me think that it can't (or shouldn't) be done.

Thanks