Ltd Company CTG / taper relief

[ace00]

Hi,

Simple question though seemingly too difficult for my accountant (but at least he's cheap...).

Scenario:

Company trades for about 4 years
Company annual end of year profits retained in bank (not payed as salary, PAYE or divi):
1k
<1k
50k
100k

Can company then be closed, 100k taxed as capital gains, with 75% taper relief?
Does the 100k have to be held for 2 years+, or is it the company that needs to be held for 2 years+?


Thanks

[Alan @ BroomeAffinity]

Hi,

Simple question though seemingly too difficult for my accountant (but at least he's cheap...).


Thanks

If your accountant can't answer this question then he could prove anything but cheap!!

Essentially your udnerstandoing of the CGT and taper relief is correct but you better get your skates on as the taper relief tapers out at the end of the tax year.

[PorkPie]

to be honest, I think you're too late to take advantage of the current rules. you need to cease trading, apply for ESCC16, get that approved by HMRC, prepare final accounts, pay HMRC outstanding CT and then you can distribute the funds from the company; as ESC C16 applies to your personal tax liability I would say you'd struggle to make the distribution before 6th april. Especially if your accountant is cr*p.

[Hex]

Presuming you have to wait until after April, then you can still do this and treat the proceeds as capital, but taper relief no longer applies. However, there is a 10% CGT rate available on the proceeds with certain caveats.

So you may be able to get a similar results, although after April 5th it is slightly less attractive due to the treatment of the personal CGT allowance in the Taper Relief scenario.

[ace00]

Thanks for the advice, there's no point in me going for this for a couple of years, but at least I will hopefully still be able to use the CGT route then.

Presumably the caveats applicable post-April 08 are as described by Mr. PorkPie ?

[Nixon Williams]

Hi,

Simple question though seemingly too difficult for my accountant (but at least he's cheap...).

Scenario:

Company trades for about 4 years
Company annual end of year profits retained in bank (not payed as salary, PAYE or divi):
1k
<1k
50k
100k

Can company then be closed, 100k taxed as capital gains, with 75% taper relief?
Does the 100k have to be held for 2 years+, or is it the company that needs to be held for 2 years+?

Thanks

As has been mentioned, the taper relief will be withdrawn in 5th April.

The new regime is that effectively the first £1million of gains on the disposal will be taxed at 10% - so no real difference.

However the 2 year rule is reduced to 12 months, the business should be a trading business (rather than investment) and part of the concession is that you have no intention to start a new business.

This last clause prevents closing and opening a series of businesses to take advantage of the tax benefit.

I hope this helps.

Alan

[hgllgh]

So if you closed your company down paying 10% tax and subsequently wanted to start up again what would happen ? You'd be blocked?

[Ruprect]

So if you closed your company down paying 10% tax and subsequently wanted to start up again what would happen ? You'd be blocked?

I believe that the new legislation allows the 10% tax break once in your lifetime, so you would be allowed it once, but next time you'd have to pay the full amount.

[Ruprect]

So if you closed your company down paying 10% tax and subsequently wanted to start up again what would happen ? You'd be blocked?

I don't think they could "block" you per se - you just wouldn't get the relief.

[Hex]

I believe that the new legislation allows the 10% tax break once in your lifetime, so you would be allowed it once, but next time you'd have to pay the full amount.

It's not once in your lifetime it's a once a lifetime limit of 1 million or something. So you can do it a number of times until you've clocked up the million.