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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Im closing down a company I set up to do some contracting

Resolved Question:

I'm closing down a company I set up to do some contracting work. There is some cash in the business account. On closing the company can I take that cash and treat it as a capital gain rather than income?
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

If you have retained earnings, then you can vote yourself a dividend before closing the company. You should make sure you have cleared third party creditors if any.

Provided your total income in the curent year including the proposed dividends does not take you into higher rate tax band, then you will have no tax payable on that dividend.

If there is an option to take the cash as dividends without paying any tax then I would consider it first.

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 3 years ago.

Hi,


 


Thanks for your response. The link below takes you to an article on the subject suggesting a capital gains approach. What's your view?


 


John


 


http://www.contractoruk.com/limited_companies/how_pay_least_tax_closing_limited_company.html


 

Expert:  taxadvisor.uk replied 3 years ago.
John, thank you for your reply...

Please advise what figures you have in mind?

many thanks
Customer: replied 3 years ago.

I have just over 23k in the account but have some corporation tax to pay. That will leave around 15k

Expert:  taxadvisor.uk replied 3 years ago.
John, thank you for your reply.

As the funds are below £25k you can opt for either option.

As I stated before, if by taking dividends you remain within the basic rate of tax, then opt for this.

This would allow you to utilise your Gains allowance against other gains if any.

This is also confirmed in the article you sent me a link for .. under new rules and company holding less than £25k.

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.




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