Business closure / capital distribution question

[unrepentant]

I am in the process of closing a Ltd company whose principal asset is a freehold property that we are selling. The plan was to dispose of the assets and then make a capital distribution and strike the company off. My accountant is now saying that because of new treasury rules and because the share capital of the company is over £4k (it's £200k) we will have to instead go through a costly and time consuming members voluntary liquidation. The company has no debt. Any accountants got any bright ideas because I'm confused. It's my money after all!

Thanks

Paul

[unrepentant]

Thanks for that Eric. He said the £4k thing came from new guidelines they have received this month? I'm seeing him on Monday and all should become clear.

The plan is to dispose of all assets, leaving just cash, prior to the distribution. We're aware of the tax implications of the gain on the property (after indexation) and obviously I have to pay income tax on the dividend element. I would find it frustrating if we did have to jump through further costly hoops just to get our own money back!

[unrepentant]

Eric Mc said:

If it really is the case, maybe the company should look at ways of reducing its share capital below the magic threshold.

That was my suggestion, that we reduce the share capital by a share buy back. He's looking into that as a way round it. I'll get the reference for this notification and I'll post it.

Thanks

Paul

[unrepentant]

All good stuff. TY both.

We've accounted for taper relief. The divident element is just the excess profit after taper relief, indexation etc..

I think what he (my accountant) is saying is that if your share capital is over £4k the revenue are now saying they wont give permission without a MVL.

[unrepentant]

thewave said:

JagLover said:

When winding up a company you have the option of distributing all the assets to the shareholders as a capital distribution.

You write to the IR, using form C16, and ask for their permission and if they grant it then it is treated exactly the same as if an outside party purchased your shares.

This is far more tax efficient than taking the money as a dividend. Since you will have taper relief as your shares should be considered a business asset.

Presuming the freehold property wasn't just an investment of the company?

No it was a commercial property and the business traded from it.

[unrepentant]

wattsm666 said:

The £4k is a Crown issue, not a treasury issue even though they are one and the same. On a striking off all assets not previously distributed go to the Crown, however, there is an exemption for assets less than £4k.

Solutions - pre striking off dividend (may be expensive in tax terms)or Members Voluntary Liqudiation if you want to retain tax advantages.

See below:

www.geoffreymartin.co.uk/corporate_insolvency_bulletins6.htm

Hmm...

I guess thats what he's referring to.

Bollox.

[unrepentant]

wattsm666 said:

I reckon a MVl would only cost about £3k to £4k, which on £200k property is not so bad. The downside of owning a property in a ltd co.

He said £5k. Just pisses me off to have to spend that to get my own money back.

[unrepentant]

Eric Mc said:

Thanks for posting that link up. That was all news to me - and yet another reason for NOT having land and property in the name of a limited company.

TBH when I set up that company I had capital gains issues and I saved £80k by rolling over £200k into it. We used £90k of it to buy this property, which the business has used, which is now worth £230k so it's worked well. I just object to giving the government a penny I don't have to. Bastards. If my accountant suggests a way around I'll let you know.

[unrepentant]

Having had my meeting it looks like I am going to be forced to go for the MVL. To do this I have to use a licenced insolvency practitioner and the cost will be approx £5k of which £1k is disbursments. All that to repay myself the share capital that I put up originally, and despite the company having no debts, having never had any borrowings etc. and having liquid assets in the form of cash of over £350k when the property is sold, so far from "insolvent".

Blood close to boiling point.

And some tt reversed into my TVR in Tesco's car park yesterday.

[unrepentant]

wattsm666 said:

The IP should be able to reduce the disbursements by getting you to take all the liqud cash as a loan from the company prior to entering liqudiation. You will need to provide an indeminty, but it will reduce the bond costs, which is probably the biggest disbursement.

Thanks. But the disbursments are relatively small. I'd rather reduce their fee!