How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4085
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

Evening I am completing a SA Tax Return sole trader. Prior

Customer Question

Evening
I am completing a SA Tax Return for a sole trader.
Prior to being a sole trader he was a Director in another business, holding 36% of stocks. There were another 3 members. This business ceased trading and went through a Members Voluntary Liquidation.
This was completed during 2013/14 period.
Funds were transferred into a liquidation account, opened on behalf of the company.
3 payments were made to my Client, worded by the Liquidator as
- I am pleased to declare a first distribution to shareholders of £2.80 per 10p Ordinary share
- I have declared a second interim distribution to shareholders of 16p per share
- I have declared a final distribution to shareholders of 1.28p per share
How should this be treated on the SA Tax form?
Are there any tax reliefs that need to be calculated?
Thanks
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
It is not actually income, but falls within the Capital Gains Tax regime. The total distribution made is the disposal price for his share of the business. This should be deducted from the original investment made in the business to determine the gain or loss made. If it is a gain it must be declared as such, but you do have an Annual Exempt Allowance of 11K to offset this. Any surplus over this, the taxable element of the gain, is then taxed. A;most certainly you will be entitled to Entrepreneurs' Relief which limits the tax rate to 10% as opposed to the normal 18% of 28% or a combination of the two rates depending on your income including the gain in the year of sale.
Conversely, if a capital loss is made this can be set against other capital gains in the tax year or carried forward indefinitely.
I do hope to have shed some light on your question.
Customer: replied 2 years ago.

Thanks for such a prompt response.

My Client does not know how much he paid, I will ask him again to check his records to see if he has any other value. If there is not further information should I assume it was 10p per share, based on the class of share he held?

You state he is almost certainly entitled to Entrepreneurs Relief - how do I check this?

Thanks

Expert:  bigduckontax replied 2 years ago.
When I am giving an opinion I try not to be too dogmatic. Entrepreneurs' Relief is quite complex and you would appear to comply and should therefore be entitled. You can read all about it here:
https://www.gov.uk/entrepreneurs-relief/eligibility
The company accounts should have an indication of the amounts paid up on shares to enable a reliable estimate to be made.
Please be so kind as to rate me before you leave the just Aanswer site.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.