Contractors' Questions: Can two years’ CGT allowances cover a MVL?

Contractor’s Question: If monies from a Members’ Voluntary Liquidation of a company have been distributed in two instalments spanning two tax years, can I spread capital income from this single capital transaction into both tax years, using both years' capital gains tax allowances? Or is this still treated as just a single transaction that has wholly happened at the point when liquidation was started?  

Expert’s Answer: The capital gain would be reported in the tax year in which the instalment - part payment of the disposal proceeds - was paid.

In other words, the salient point for which tax year the capital tax allowances can be claimed is the date of the distribution(s) by the liquidator to the shareholders.

In your situation, it is important to remember that only part of the allowable expenditure (cost of the shares) can be deducted in the computation of the gain for each period.

To calculate this, the proportion is arrived at by calculating the disposal consideration divided by the disposal consideration plus the value of the part retained at the time of the part-disposal (or part already disposed of for the second instalment).

The expert was Candice Fourie of contractor accountancy firm No Worries Company Services Ltd.

Sunday 18th Jan 2015
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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