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bigduckontax, Accountant
Category: Tax
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Limited co since 1992. trading until this year. Reserves £250k

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Limited co since 1992. trading until this year. Reserves £250k but £200k from recent sale of investment in private company.
Co owns freehold commercial building which it bought 1996 and occupied 30% (70% tenant) until 2010 when tenant occupied 100%. Co continued to trade from director's home.
Tenant has lease until April 2016.
Can shareholders claim ER on the reserves ? If so does co wait until April 2016?
Then if freehold sold -can any of the profit on the sale of the asset be subject to ER-(bearing in mind tenanted ) or does shares in company need to be sold?
If premises not sold and company remains an investment company -can reserves at that date be withdrawn under ER?
Very bitty but can you help?
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. The shareholders have no access to the trading activities of the company. Companies are not subject to Capital Gains Tax in any event, any capital gains and losses being rolled into the Profit and Loss Account and exposed to Corporation Tax. The only way shareholders would be able to use ER is on the sale of the company and then against their own personal CGT liability pursuant to the sale. I am so sorry to have to rain on your Parade.
Customer: replied 2 years ago.

Hi Keith

Thanks for reply-I think some points missed but I appreciate it is confusing -they could have an MVL now and could claim ER -but could they if the reserves are 90% from sale of investment?

And the problem is that the co still owns a freehold comm building as explained .

My own view is that as co owns freehold still -and there are time restraints -may have to keep company going and take dividends over next few years?

But what would happen if freehold sold next year -co would pay gains-THEN could co be closed with MVL and owners claiming ER?

If they went through a MVL then the following occurs (source: Contractor UK, Beacon):

'Even following the new rules, assets distributed under a Members Voluntary Liquidation (MVL) are still taxed on the shareholders' as capital'

The company selling the feehold would bring any gains into the Profit and Loss account which would be taxed under the Corporation Tax regime at 20%. After settlement the balance would be available to shareholders in a MVL and the individuals' gain on that could generate an entitlement to ER which limits the CGT to a flat rate 10%.

Customer: replied 2 years ago.

Thanks Keith

But what about time constraint re ER claim -co ceased trading March 2015?

And what about fact that building if building sold -it was rented out rather than occupied by staff etc -as stated before -still 100% ER .

If building was not sold -then could reserves still be withdrawn as a capital distribution ( i.e. ER ) and leave building in company and co continues as a trading company.

I am okay with paying for further advice if you explain how I can do this?

Also -is it possible to speak on telephone?



Blaine ER only comes into play when there is a disposal of an assets which creates a CGT liability and then only for specific individuals. If the Company sells out its building then as far as individual shareholders are concerned there is no capital gain; that is the company's and as I have explained is merely an exceptional item in the Profit and Loss Account and liable to CT at 20%. MHA MacIntyre Hudson has the following pithy advice: 'HMRC has now legislated for this issue and as of 1 March 2012 solvent companies which are to be dissolved without the need for a formal liquidation are only able to treat distributions to shareholders as a capital receipt, subject to capital gains tax, if the total distributions do not exceed £25,000. If the distributions do exceed £25,000 then all the payments made by the company to shareholders will be treated as an income distribution, subject to income tax at up to 50% (NB rate slightly out of date).' It thus all depends upon the level of distribution proposed. Of course, with a MVL there is no Problem, it is a disposal for CGT. The danger with a distrubution and the company remaining in existance would be a dispute with HMRC as to whether it is a capital or income pay out; obviously from HMRC's Point of view income would attract tax up to 40% whilst the maximum level of CGT is 28%, or if ER applies, a mere 10%. I would be delighted to talk to you on the telephone, but I am currently on holiday in Germany and will not be available in the UK until Wednesday. Regards Keith
bigduckontax and other Tax Specialists are ready to help you
Thank you for your excellent support.
Customer: replied 2 years ago.

Hi Keith

I think you have helped me - how would I ask for you if I use again ?

My telephone number 0208(###) ###-####-can I ring you direct or is that a breach of your terms there?

Kind regards


Hi Blaine


Just request me when you post your question, that is the easiest way. I would have 15 minutes to respond after which the question would be thrown open to all experts.


Pleased to have been of assistance.