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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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SALE OF AN INCORPORATED COMPANY : If assets are sold (rather

Resolved Question:

SALE OF AN INCORPORATED COMPANY :
If assets are sold (rather than share sale) presume company wiil be liable to C/T on any gains ?
When funds are withdrawn by shareholders are they treated :
a) As a distribution (ie dividend) and taxed at 10% or 32.5% income tax as applicable.
b) As a capital distribution (ie capital gain)
c) If the latter, will Entrepreneurs Relief be available ?
Note that the sale is of a trading company in it's entirety. Business owned for 12 years.
Your advice would be appreciated.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Let me take a look at this and I'll get back to you.
Expert:  TonyTax replied 2 years ago.

Hi again.

If the company sells its assets, it will pay corporation tax on the gains.

a and b That depends on how much there is to distribute and how the company is closed down. If you go through an informal winding up process and there is more than £25,000 to be paid out to the shareholders, then it has to be paid out as a dividend which is potentially taxable at 32.5% in their hands depending on their personal circumstances. If there is £25,000 or less to distribute, then an informal winding up process can be followed and the cash distributed as a capital sum which then brings the possibility of entrepreneurs' relief into play.

If the company goes through a formal liquidation process by appointing a liquidator, then the cash can be distributed as capital. Provided the criteria are met, entrepreneurs' relief may be claimed in which case capital gains tax will be charged at 10% instead of the regular rates of 18%, 28% or a combination of the two depending on the level of the shareholder's other income.

Take a look here and here for more information.

c Entrepreneurs' relief will be available so long as the qualifying criteria are met. Take a look here for information on ER.

I hope this helps but let me know if you have any further questions.

TonyTax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Thank you Tony, much appreciated.

Best Regards

Alan

Expert:  TonyTax replied 2 years ago.
Thanks and good luck.