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bigduckontax
bigduckontax, Accountant
Category: Tax
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I put my company into voluntary liquidation on 12/12/2013.

Customer Question

I put my company into voluntary liquidation on 12/12/2013. If I receive the proceeds from the liquidators
in two tax years ie say half now and half after 6/4/2014 will I get two £10600 CGT exemptions. Will the revenue try to say it should all be in one year? Would the revenue also try to say I should have paid dividends out of the company?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I'm Keith and happy to help you with your question.

 

he taxation treatment depends on the amount received from the liquidators. Under 25K it comes under the CGT regime. Over 25K the whole sum is treated as a dividend, even the first 25K. It's an all or nothing situation. If you were an original investor you might be entitled to Entrepreneur's Relief which would reduce the CGT to a lower 10% rate. If you have gone over the 25K level then this will not apply. For tax purposes CGT and Income Tax apply as at the date of receipt, but rest assured that HMRC will extract the most tax from the situation as they can, especially if the 25K limit is breached..

 

With the greatest respect you should have sought professional advice before embarking on a voluntary liquidation. It could cost you dear.

Customer: replied 2 years ago.

Hi entrepreneurs relief is available


The question was could the proceeds be received in two tax years and get two CGT £10600 exemptions Distribution is likely to be £120000

Expert:  bigduckontax replied 2 years ago.
If the distribution is going to be 120K then there is no CGT to consider at all and the whole sum will be treated as a dividend crystalising on the date each settlement is made.
Customer: replied 2 years ago.

Hi entrepreneurs relief comes under capital gains tax !


under my original question surely there are no dividends but only distributions?


Are you familiar with UK taxes?, not being rude but find your answers difficult to follow.


But many thanks for your help

Expert:  bigduckontax replied 2 years ago.
Yes, this is the UK taxation position Even I was surprised at the result of a voluntary liquidation. My instinct was that it would all be liable to CGT, but on checking I find that this is not the case. The law changed in 2010 (CTA 2010 s. 1030A).

Correct, Entrepreneurs Allowance (EA) is applicable to CGT, but in your liquidation CGT and thus EA doesn't come into the equation. The distributions are indeed not dividends, but for tax purposes are so treated. Sorry, but that's how the law works.
Expert:  bigduckontax replied 2 years ago.
Short post to clear my question box!

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