Capital Distribution / Entrepreneurs tax relief - experiences

[Clare@InTouch]

Hmm I've just read this and I've got to say I'm a little lost? Does it mean the Government are reviewing CD/ETR? Or does it relate to something slightly different? Apologies for being a bit dim.

Capital Distributions and ER are two different things.

ESC C16 is the Extra Statutory Concession that allows someone to close a company without a full liquidation and to then take the remaining money as a Capital Distribution (on your tax return ER is then calculated on that distribution to give the extra tax benefits). It's this concession that is being looked at, along with a fair few other concessions I believe.

[caffeine fuelled]

Just to make you aware that HMRC are running a consultation about possible changes to ESC16 - you can find some details here:

Garbetts: Proposed Statutory Enactment of ESC C16

Hmm I've just read this and I've got to say I'm a little lost? Does it mean the Government are reviewing CD/ETR? Or does it relate to something slightly different? Apologies for being a bit dim.

[Normie]

Just to make you aware that HMRC are running a consultation about possible changes to ESC16 - you can find some details here:

Garbetts: Proposed Statutory Enactment of ESC C16

[caffeine fuelled]

Thanks Clare, sounds like I might have been worrying for nothing. I might wait another year and stash a bit more away.

[Clare@InTouch]

Yep, my only thought was what if the revenue closed CD/ETR.

It seems like a daft thing to do now for any government and something that would smack personal initiative and all things entrepreneurial right in the face but when was the last time the Government did something sensible?

Unless the rules are being used to evade tax and there's a need to add in some anti-forstalling measures to stop people in their tracks, such as with the recent EBT issues, then it's unlikley a relief would be withdrawn with immediate effect. If anything it would be announced during a budget and brought in the following year.

ER and similar reliefs like Taper and Indexation have been around for decades, there's no rumblings that I've heard that would indicate they are being withdrawn anytime soon. Is there any reason you're worried they may be?

[caffeine fuelled]

aka Phoenix company.

How would you bill for the next year - PAYE Umbrella? Are you sure that the tax advantages would still be worthwhile if you paid PAYE for a year?

Yep, my only thought was what if the revenue closed CD/ETR.

It seems like a daft thing to do now for any government and something that would smack personal initiative and all things entrepreneurial right in the face but when was the last time the Government did something sensible?

[Clare@InTouch]

HMRC will grant the ESC C16, but only after you have submitted the acccounts and CT600. Therefore, best to apply for ESC C16 after the accounts and CT600 have been submitted and agreed by HMRC.

You can apply beforehand and HMRC will still agree the ESC, but agreement to the actual striking off will not be given until the accounts and CT600 have been filed with them (otherwise you'd be filing accounts showing the Capital Distribution before it had been agreed by HMRC, which would seem quite backwards...)

I've received just such an agreement today.

[Robot]

ESC C16

HMRC will grant the ESC C16, but only after you have submitted the acccounts and CT600. Therefore, best to apply for ESC C16 after the accounts and CT600 have been submitted and agreed by HMRC.

[ChimpMaster]

Thanks Claire,

Hmm so I might need to leave it a while before openning another company? Would a year be long enough?

aka Phoenix company.

How would you bill for the next year - PAYE Umbrella? Are you sure that the tax advantages would still be worthwhile if you paid PAYE for a year?

[caffeine fuelled]

Thanks Claire,

Hmm so I might need to leave it a while before openning another company? Would a year be long enough?

[Clare@InTouch]

Cool does this mean HMRC can't turn you down?

The savings are quite substantial and am amazed HMRC let it all go through so easily. I'm a contractor and plan on openning another company shortly after, I'm doing it now just in case HMRC close it down.

HMRC can turn you down, and they can investigate the application for the ESC further.

When you apply for ESC C16 one of the statutory declarations you sign states that you're not continuing the business - if you close one company only to open a new company doing the same thing then that's not correct. The ESC would therefore not apply and you wouldn't be able to take the money as a capital gain.

[caffeine fuelled]

Assuming that you are looking to close your company to make the capital distribution, you would need to write to HMRC to apply for ESC C16. Once this has been granted by HMRC, you can then prepare final accounts for your company and work out the final capital distribution. You then declare the distribution on your personal tax return under the capital gains section and pay over the associated CGT.

Entrepreneurs relief is not something you apply for but what you apply to the capital distribution to work out the CGT.

Cool does this mean HMRC can't turn you down?

The savings are quite substantial and am amazed HMRC let it all go through so easily. I'm a contractor and plan on openning another company shortly after, I'm doing it now just in case HMRC close it down.

[Craig@Clarity]

Assuming that you are looking to close your company to make the capital distribution, you would need to write to HMRC to apply for ESC C16. Once this has been granted by HMRC, you can then prepare final accounts for your company and work out the final capital distribution. You then declare the distribution on your personal tax return under the capital gains section and pay over the associated CGT.

Entrepreneurs relief is not something you apply for but what you apply to the capital distribution to work out the CGT.

[caffeine fuelled]

Hi,

I've had a company for a while now (four and a bit years) and have saved quite a bit in the company and wanted to know if anybody had used capital distribution / entrepreneurs tax relief and how they’d found the process?

I think you have to apply to HMRC, so wondered if anybody had had it denied?

Thanks