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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3814
Experience:  FCCA FCMA CGMA ACIS
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Hi, I am a one of 3 directors of a company, I own 50% shares

Customer Question

Hi,
I am a one of 3 directors of a company, I own 50% shares and one of the other directors has the othe 50%. The third director has no shares. We do not have any director or shareholder agreements in place.
We all take 50k per year salary, year start April.
If we choose to liquidate the company, after creditors and redundancy we have 600k in the bank. Is this amount divisible only between the shareholders? And what is the most tax efficient way of receiving the money, through dividends or is it only allowed to be taken as income if the company is closing down?
A breakdown of tax on the 600k would be ideal.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
On dissolution the split would be between shareholders only unless an agreement to the contrary were made. Assuming that this was the case each would receive 200K, the directors tranches subject to Capital Gains Tax at the Entrepreneurs Relief level of 10%. Both would have an Annual Exempt Allowance of 11K leaving 189K taxable, 18.9K tax due.
The other director's share would be subject to Income Tax (IT) at his marginal rate. Assuming he receives his salary this wold be 250K at which lever he has no personal allowance so he is taxed on 250K.
31865 @ 20% = 6373
208135 at higher rates that is
58135 @ 45% = 26160
118135 @ 40% = 47266
Total tax say 8oK.
Dividends would be a dead duck as they would be grossed up for higher rates IT anyway for each individual.
Customer: replied 2 years ago.

Thank you for your replay.

Just for confirmation, how was the 200k calculated? Was it 600k divided by the 3 directors?

Thanks...

Expert:  bigduckontax replied 2 years ago.
Yes it was; I assumed that there would be an agreement between them for an equal distribution of the remaining funds within the company.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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