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bigduckontax
bigduckontax, Accountant
Category: Tax
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Which is the best way to show in Ltd accounts a capital

Customer Question

Which is the best way to show in Ltd accounts a capital distribution namely ESCC16 distribution below 25k if its shown as a dividend it will overdraw the reserves should it be shown as a debit balance on the DLA?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I m Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. My immediate reaction is why you should have to bother about the accounts at all as ESCC16 is an HMRC concession which allows [source Philip Beck; Chartered Accountant {edited}]: 'the directors of a company [below 25K] to effectively wind up a solvent company themselves without appointing a liquidator and pass the surplus funds to the shareholders as capital receipts rather than dividends. This had the dual benefits of a likely lower tax charge on the shareholders (capital gains tax rather than income tax, especially if Entrepreneurs Relief applied), and also avoiding the costs of appointing a liquidator.' As the company is being would up the point appears academic. I do hope that I have shed some light on the situation.

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