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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15950
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have a limited company that started trading in 1999. My

Resolved Question:

Hi I have a limited company that started trading in 1999.
My wife and I are directors of the company. I hold 75% of the shares and my wife holds 25%. The company has a retained profit of about £150,000 which we viewed as part of our pension pot.
I am 60 and am looking at my retirement options
I have been told that I could close the company and only pay between 7 - 10% tax on the retained profit
My 1st question is - Is this correct?
If it is correct my wife and I would then be left with c£135,000
My 2nd question is would the £135,000 be further taxed as income (for example anything over £42k would be taxed at the higher amount) .
I hope this makes sense?
Kind regards
Brian
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.

Hi.

If you went through a formal liquidation, you should be able to withdraw the £150,000 as a capital payment, split between you and your wife in proportion to your shareholdings. You would then disclose the payment as a capital gain and claim entrepreneurs' relief. Assuming you qualified for ER, you and your wife would pay Capital Gains Tax at 10%. If you set up the company from scratch, then the cost of your shares will be very low so the gains for each of you and your wife will be 100% of the cash. Any other method of withdrawal would leave the payments subject to income tax on dividends and income tax and national insurance contributions (on salary).

Take a look here and here for more information.

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

Customer: replied 1 year ago.

Hi

Many thanks for your assistance.

Just to be clear, if we liquidated the company and paid the 10% corporation tax, the amount paid to us would not be subject to further taxation. for example say my share was £75,000 after corporation tax the taxman could not deduct any further tax and the amount would be net.

Apologies is this seems a silly question.

Kind regards

Brian

Expert:  TonyTax replied 1 year ago.

It's not corporation tax, it's personal capital gains tax. It would be the same if you sold your company shares and made a capital gain. The difference is you are looking ti liquidate the company and taking the cash out as a capital payment as opposed to a dividend or salary payment.

If you qualify for ER, the CGT will be the extent of your tax liability.

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