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Sam
Sam, Accountant
Category: Tax
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After Voluntary liquidation and as a shareholder of the business,

Resolved Question:

After Voluntary liquidation and as a shareholder of the business, I have received a capital distribution of £25,000 paid in the financial tax year 13/14.
Not sure how to record this on the tax return.
Submitted: 3 years ago.
Category: Tax
Expert:  Sam replied 3 years ago.
Hi
Thanks for our question, I am Sam and I am one of the UK tax experts here on Just Answer.
Do you know under what law the company was dissolved? As this can affect the way in which this capital distribution is treated for tax purposes.
If the company was dissolved under Companies Act 2006, s 1000 then payments under £25,000 can be treated as a capital gain (and also will attract entrepreneurs relief - so just liable to 10% if all other conditions met with the first £10900 as tax free)) but as its £25,000 then its treated as a dividend and reported accordingly on the self assessment tax return.
If the company was dissolved under the Insolvency Act 1986 then the payment is treated under capital gains regardless of its size.
So you do need to establish under what legislation the company was dissolved and the insolvency practitioner that handled this can advise further
Let me know if you have any follow up questions
Thanks
Sam
Customer: replied 3 years ago.

Not sure what law the company was dissolved. All I know is that the liquidator on writing to me when distributing the capital informed me I would be liable to capital gains tax. So do I need to fill in supplimentary pages on the tax return or can it be placed on the form itself under CapitalGains

Expert:  Sam replied 3 years ago.
Hi
Then it sounds like it was under voluntary basis so you will need to complete the capital gain part of the tax return too - (so on the form itself under capital gains)
Thanks
Sam
Customer: replied 3 years ago.

So would I put the amount and where the capital came from?

Example: voluntary liquidation capital distribution

Expert:  Sam replied 3 years ago.
Hi
Thanks for your response
Yes you type in the sort of disposal made, the amount (less the annual exemption allowance) and the relief claimed (entrepreneurs relief)
Link here for you to establish if you are entitled to this relief
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323651/hs275.pdf
Let me know if you have any follow up questions
Thanks
Sam
Customer: replied 3 years ago.

I don't fall into the Entrepreneurs relief catagory.

So I enter £14,100

Expert:  Sam replied 3 years ago.
Hi
That's right
If you are completing an online return then once you have completed filling in the sections selected - a calculation of overall tax will be made for you - and this will determine what element of the £14100 is liable to 18% (if you have any unused basic rate band) and the remaining (Or all if you annual income is in excess of the 20% rate band) at 28%
If you are completing the paper return then HMRC will calculate this on receipt of your return and once they have entered the figures onto your self assessment tax record.
Let me know if you have any follow up questions, but it would be appreciated if you could rate the level of service you have received, as this ensures I am credited for my time.
Thanks
Sam
Customer: replied 3 years ago.

Thankyou Sam

I do not have an annual income, so I think my capital will be taxed at 18%

Expert:  Sam replied 3 years ago.
Hi Katherine
Yes it will
Then you have until 31/01/2015 to pay the capital gain tax bill (you will be send a demand and payment slip in time for this date, they are usually issued from December to January ready for the payment date)
Thanks
Sam
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Customer: replied 3 years ago.

Hi Sam


Just been on the Gov.uk website, not sure how to register!!!