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TaxRobin, Tax Consultant
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Experience:  International tax
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Closing a ltd company. Our company has ceased trading, all

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Closing a ltd company. Our company has ceased trading, all bills are paid including final accounts and corporation tax, no debtors or creditors, two directors who wish to close down and retire, cash in the bank over £500,000 to be shared equally between the retiring directors. No disputes, no employees, no assets or property. We have been told to gain entrepeneurs tax relief on the capital we have to use a liquidator to wind up the company. Not only will this cost money it will also take a ridiculous amount of time for us to be able to access our own cash! I have no idea what a liquidator will do with a company that is not in debt, not owed anything, has no shareholders and two directors in full agreement about how to split the proceeds of a successful business that they now wish to close. We appear to qualify for entrepeneurs relief but our accountant is telling us that any capital over £25k will attract the full capital gains tax of 28% unless we use a liquidator. This simply does not make sense to us, what is the connection between using a liquidator and ER ? Why can we not simply do a Voluntary Striking Off process? I cannot get through to HMRC. Any advice would be very welcome, we simply want to wind everything up and retire with our nest egg!
HelloUnder the voluntary strike off process the rules on maintaining capital continue to apply and any distributions of the capital of the company are illegal. Despite the illegality some directors do transfer all of a company ’s assets to the shareholders and then apply for a voluntary strike off.In an Members’ Voluntary Liquidation (MVL) the Liquidator will ensure that any expenses and liabilities of the company are paid. He will then distribute all surplus assets to the shareholders. Following which the company is dissolved. Any distribution made by the liquidator can be considered final. A distribution from an MVL is treated as a capital distribution and should be included in the shareholders’ capital gains calculations for taxation purposes.The two processes are not equivalent, although they do both lead to a company being dissolved.The advantages of an MVL are:• Repay capital to shareholders• Crystallise liabilities - any creditors not claiming within set period are barred from claiming against the company• Closes tax accounts.
Customer: replied 2 years ago.
My understanding is that in the UK bank accounts MUST be closed and assets distributed before the VSO is submitted otherwise all cash goes to the Treasury and you have to apply to the courts to re open the company to access your money, so I don't understand why you say it is illegal to take money out of the company. There are no debts, no creditors, the only shareholders are the Directors who own 50% each of the company. There are no assets to sell, no property owned by the company there is simply an amount of cash left in the bank that needs to be shared out between the Directors in the most tax efficient manner. The whole point of creating the company 20 years ago was to build a nest egg on retirement, the company has ceased trading and all money has been accounted for, all costs have been paid ie corporation tax it should be a simple matter of dividing the cash left. Why do we need a liquidator? No one, not even HMRC seems to be able to answer this. I cannot see what a liquidator will do - there are no debts, no one owes the company anything, no employees, the only shareholders are the two directors, the company has not failed or gone wrong in any way, it is simply time to retire - the company provided medical services and no longer holds any NHS contracts as these are now defunct so there is no future for the company, time to close down. It really should not be this complicated should it?
I understand your wanting to take the easiest path. Your accountant and I have both advised.
TaxRobin and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Thanks - I still don't get it, seems like a way to keep employing someone you actually have no need for there really is nothing for a liquidator to actually do other than delay access to our hard earned funds and get paid for doing it.
I wish I could tell you differently.
Customer: replied 2 years ago.
Sorry - one last question! Who would prosecute and what would the charge be if we don't use a liquidator? All the money would be declared on our personal tax returns and as there are no outstanding debts who would be prosecuting us? What would the penalties be?