Reply to: Company Strike Off + Capital Gains Tax confusion

[northernladuk]

Find yourself another accountant. You have got yourself in a right mess so it is time to get some professional advice. You could be throwing money down the drain trying to do this yourself and asking for advice on a free forum. Our accountant guys are top notch but they don't know your full circumstances.

Could be the best couple of hundred quid you spend so get one now.

[Nixon Williams]

Hi Andrew, RE is 50000. Cash about 45000.
When I complete my Self Assessment, should I put it down as dividend, and if it is dividend, should it be 50000 or 45000?

Thanks,
MrsKay

If you are asking questions of this nature, I would strongly recommend that you speak to your accountant or seek advice from one who can see the full picture.

I would be wary of giving advice to you with the limited information you have provioded so far.

Alan

[MrsKay]

Otherwise take the closing RE per the final accounts!

Hi Andrew, RE is 50000. Cash about 45000.
When I complete my Self Assessment, should I put it down as dividend, and if it is dividend, should it be 50000 or 45000?

Thanks,
MrsKay

[MrsKay]

Hi,

I am sorry,This isn't my area of expertise, that's why I am even more confused.

The only outgoing incurred after the last contract was Accountancy Fees, company domain (website/emails) fees, and monthly bank charges.

My accountant advised me this is the most effective way to shut down the company - apply to strike off, and distribute the gains, and pay Capital Gains Tax.

My accountant sent me a set of document templates to be sent to relevant organisations including HMRC, Companies House, bank etc.
In his email he mentioned some of the documents must Only be sent after the accounts are finalised.
But I made a mistake by sending the HMRC letter too soon. I told my accountant about this and he said I should phone HMRC and explained (that I should only send the letter after the accounts are finalised), which I did.
HMRC helpline couldn't answer this question, but someone from HMRC called me back. He said he didn't agree with my accountant because I have paid all my taxes and the company has not traded since and I am free to close the company down. Companies House also agreed that I can close the company any time.

I naturally told my accountant what HMRC and Companies House had informed me and asked them to double check.
I have not heard from them since... this was back in February.

I guess there is not much I can do now, just have to pay more tax in 2014.

Thanks,
MrsKay

[stek]

Company Strike Off + Capital Gains Tax confusion

Bold bit above was more my concern. Company was closed down after ESC C16 went out the window. Therefore as it sounds like net assets were £40k, and the company was struck off rather than liquidated, entrepreneurs relief doesn't even come into it as that only applies to CGT. In this instance I'd expect all the funds to be taxed as dividends.

To the OP, I'm afraid as others have said, too late for much in the way of tax planning now. Your options should have been discussed before you closed the company. Reality is in this case probably not too much harm done.

Where's the schadenfreude in that??!!

[Maslins]

Re: point 2) You will be paying CGT on the retained earnings (RE) not the remaining cash in the bank account.

If RE is less than £25k then automatically treated as capital distribution.

If RE is more than >£25 then need to formally liquidate the company and use insolvency practioner - usually costs c.£4k.

Probably best to confirm situation with your accountant.

Andrew

Bold bit above was more my concern. Company was closed down after ESC C16 went out the window. Therefore as it sounds like net assets were £40k, and the company was struck off rather than liquidated, entrepreneurs relief doesn't even come into it as that only applies to CGT. In this instance I'd expect all the funds to be taxed as dividends.

To the OP, I'm afraid as others have said, too late for much in the way of tax planning now. Your options should have been discussed before you closed the company. Reality is in this case probably not too much harm done.

[Andrew@Wisteria]

FTFY to reflect the OP's situation.

Thanks NLUK! I'm sure they would be happy to clarify via a quick phone call (hopefully some relationship still there!)

Otherwise take the closing RE per the final accounts!

[northernladuk]

Re: point 2) You will be paying CGT on the retained earnings (RE) not the remaining cash in the bank account.

If RE is less than £25k then automatically treated as capital distribution.

If RE is more than >£25 then need to formally liquidate the company and use insolvency practioner - usually costs c.£4k.

Probably best to confirm situation with your EX-accountant.

Andrew

FTFY to reflect the OP's situation.

[Andrew@Wisteria]

Hi,

My questions are:
1) Do I have to apply for Entrepreneur's Relief?
2) I will declare the £20K each in our self assessments as Capital Gains Tax. I understand that the first £10900 are tax free, and the remaining are taxed at 28%, is this correct?
3) Is there anything else I can do to more efficiently manage this company strike off exercise?

Many thanks,
MrsKay

Re: point 2) You will be paying CGT on the retained earnings (RE) not the remaining cash in the bank account.

If RE is less than £25k then automatically treated as capital distribution.

If RE is more than >£25 then need to formally liquidate the company and use insolvency practioner - usually costs c.£4k.

Probably best to confirm situation with your accountant.

Andrew

[northernladuk]

Make absolutely sure the bank is empty before the company is struck off. If there is anything left it becomes property of the crown and I believe it is a right bitch to re-open the company to get at the money.

[Nixon Williams]

Is there a time limit, I heard you need to put you tax return in within 9 months of recieving the capital payment ?

The capital gain would need to be declared on the tax return for the year that it took place.

So if the capital gain took place today, 25th April 2013, this is in the 2013/14 tax year, so the tax return for this year will need to be filed by 31st January 2015.

A capital gain does not accelerate the timescale for submitting your tax return.

Alan

[Nixon Williams]

Many thanks for your reply, Alan.

Can I be cheeky and ask a further question about "trading date"?
The day I ceased trading, is it the last day of my last contract?
This is the day I use to define "ceased trading".

The company still continues to pay bills until recently.

Many thanks,
MrsKay

Whilst it is unlikely that the Revenue will question this in great detail, as the sums are quite small, but I would define the last trading date as when you ceased trading, ie contracting through the company.

It sounds as though the company was dormant after this, pending the eventual closure.

The only bills you should have had whilst dormant would be for taxes and perhaps a few small overheads.

Alan

[ELBBUBKUNPS]

1. You do not actually apply for Entrepreneur's Relief, assuming that you qualify then you would claim it on the tax return. A quick look at your dates, I would guess that you do NOT qualify as you did not trade for 12 months!

2. The £10,900 free allowance is for 2013/14, depending when in April you distributed the funds, the gain may relate to 2012/13, in which case the allowance was £10,600. If you do not qualify for ER and you are a higher rate taxpayer, then the CGT rate is 28%.

3. It is really too late to arrange your affairs in a tax efficient manner, this should have been discussed with your accountant before you took any action.

Alan

Is there a time limit, I heard you need to put you tax return in within 9 months of recieving the capital payment ?

[northernladuk]

You contract is just income to the company. The company can still be trading even if there is no income.

[stek]

Company Strike Off + Capital Gains Tax confusion

Paying bills even though you've paid your final CT? That means you haven't ceased trading and will need another accounting period to resolve.

Sounds like a total eff up to me, you got yourself in a world of pain it seems to me!