Winding Up Limited Company - Tax Considerations

[dmuk]

I am trying to find some updated guidance on the tax considerations when winding up a limited company. Ideally I am trying to calculate my potential tax liability is I wind up and utilise Entrepreneurs’ Relief.

I am looking at ceasing trading and potentially leaving the UK.

From what I understand so far:

1) Close Investment Company (CIC) rules may apply.
- If I cease trading, CIC rules may apply and the dividend portion would be taxed at 23%.
- This assumes I continue to take salary and dividend. The company remains active.

2) Entrepreneurs’ Relief and Section 1030A distributions.
- Claiming ER and S1030A means that funds can be withdrawn from the limited company at a rate of 10%.
- I take this to mean that I would pay 10% tax on the capital gains when I close the company?

3) ESC C16 no longer applies?
- It was possible for the assets to be released to the shareholders and be taxed as a capital gain, rather than a dividend.

Based on the above, what happens if I apply for ER and S1030A?
- I pay outstanding VAT and corp tax bills.
- I take all remaining cash out of the company.
--> I would be liable for 10% of total gains less losses (over my tax free threshold)?
--> Are gains here retained earnings or remaining cash; or are they the same thing?
- Do I continue to take salary and dividend for any period of time?
- I submit and wait for the liquidation to complete.

?

[northernladuk]

Your accountant will have some.

[dmuk]

Your accountant will have some.

Unfortunately my accountant doesn't seem very forthcoming with the information and is not very proactive. I am trying to see if there is anything I should be doing now ahead of winding up.

[stek]

Unfortunately my accountant doesn't seem very forthcoming with the information and is not very proactive. I am trying to see if there is anything I should be doing now ahead of winding up.

Get a new one.

[JB3000]

I am trying to find some updated guidance on the tax considerations when winding up a limited company. Ideally I am trying to calculate my potential tax liability is I wind up and utilise Entrepreneurs’ Relief.

I am looking at ceasing trading and potentially leaving the UK.

From what I understand so far:

1) Close Investment Company (CIC) rules may apply.
- If I cease trading, CIC rules may apply and the dividend portion would be taxed at 23%.
- This assumes I continue to take salary and dividend. The company remains active.

2) Entrepreneurs’ Relief and Section 1030A distributions.
- Claiming ER and S1030A means that funds can be withdrawn from the limited company at a rate of 10%.
- I take this to mean that I would pay 10% tax on the capital gains when I close the company?

3) ESC C16 no longer applies?
- It was possible for the assets to be released to the shareholders and be taxed as a capital gain, rather than a dividend.

Based on the above, what happens if I apply for ER and S1030A?
- I pay outstanding VAT and corp tax bills.
- I take all remaining cash out of the company.
--> I would be liable for 10% of total gains less losses (over my tax free threshold)?
--> Are gains here retained earnings or remaining cash; or are they the same thing?
- Do I continue to take salary and dividend for any period of time?
- I submit and wait for the liquidation to complete.

?

You appear to already know the outline of the process!

Also you are asking a lot of questions that you already know the answer to (obviously vat and corp tax need to be paid! if you claim ER, obviously taxable gain is taxed at 10%!, etc etc) so the next step is to appoint a liquidator to iron out the fine detail.

Re: salary and dividends, surely this is just common sense. There is obviously little point taking salary and dividends that fall into the higher rate tax band!

[Maslins]

ESC C16 is indeed dead and gone. In practice this means if you want the CGT route:
- if your company has net assets <£25k, you get CGT via a cheap and cheerful strike off.
- if your company has net assets >£25k, you'd need a members voluntary liquidation (MVL) to get CGT treatment. A strike off would lead to closing funds being taxed on you as dividends. Our sister company MVL Online offers reasonably affordable liquidations for simple solvent cases.

Alternative options tend to be:
- drip feed dividends over a number of years. Can be viable if your other income would otherwise be negligible. Not so good if you'll still be earning well, just via something other than a UK Ltd Co.
- stick hefty amounts into a pension scheme (though if >£40k in one year check with an IFA for annual limits).

[Relaxed]

Get a new one.

I spoke to about ten of them. The only thing they are capable of is mumbling very basic things from HMRC website.

[eazy]

Members Voluntary Liquidation

Members Voluntary Liquidation | MVL Online®

I have seen few recommendations for the above.