From 1 March 2012 the rules concerning closing a company have changed. Historically it was possible to close the company and take the balance of reserves as a capital gain however now a formal liquidation must be performed where reserves are in excess of £25,000.
So if you are involved with a company where perhaps there are:
• Shareholders wishing to remove their investment
• Retiring directors
• Shareholder/Director disputes
• Group/Subsidiary Companies
…then there is a tax efficient way for you to receive funds following the cessation of your business
The cost of a formal liquidation (a Members Voluntary Liquidation – MVL) depends on how complex the case is. However Warr & Co have teamed up with Wilson Field who have quoted as little as £795 + VAT and disbursements. To qualify for this level of fees the following conditions apply:
• Cash assets
• No liabilities
• Accounts & returns up to date
• Deregistered from VAT
Shareholders receiving a distribution from an MVL will usually be entitled to entrepreneurs tax at 10% (£10 million limit in their lifetime).
The alternative course of action would be to declare dividends to ensure reserves are just below £25,000. Should this be the case, the dissolution can be performed by ourselves avoiding significant fees.
If your company has traded in the final period of accounts and the reserves are in excess of the annual Capital Gains threshold, for 2013/14 this is £11,000, you may wish to instruct us to apply to HMRC to obtain Entrepreneurs relief of the gain.
The final distribution, if treated as a capital distribution is taxable at the following rates:
• 10% If Entrepreneurs relief applied
• 18% If you are a basic rate tax payer and have unused basic rate band (2012/13 £42,475)
• 28% On gains once the basic rate band is used.
Please contact us to assess the right course and timing of action for you and your business.