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bigduckontax, Accountant
Category: Tax
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Limited company has sold most of its property and business.

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limited company has sold most of its property and business. What's the best way for the sole director share holder to take the cash
Hello, I am Keith, one of the experts om Just Answer, and pleased to be able to help you with your question. As a director any payments by the company must be made through PAYE channels as a director is an employee per se. The solution may be to liquidate the company, in which case the moneys released would be exposed to the Capital Gains Tax (CGT) regime where rates of tax are generally lower. Fees for liquidation, however, are a consideration so, alternatively, just sell the company off; there is a ready market for second hand companies and you can even arrange the sale on eBay! I do hope that I have shown you a way forward in this matter.
Customer: replied 2 years ago.
The company still owns a commercial property which is leased out, can the company still be liquidated, the property transferred to the director and tax paid on its value
Yes it can. The consideration paid for the transfer or more likely the value at current market price would form part of the profit of the company as companies are not subject to CGT, all such transactions passing through the trading account and exposed to Corporation Tax (CT).
Customer: replied 2 years ago.
Having sold the largest majority and most income at the age of 65 I was considering continuing the company, buying a few houses to rent out and paying myself via dividend although the profits would be low. I am also concerned that I could be leaving a tax nightmare for my daughter should I die. Liquidating the company and paying the tax now may make life easier later, what do you think
Well it all depends. On death any assets over 325K plus any inter spousal or charitable bequests are subject to Inheritance Tax (IHT) at a flat rate of 40%. Would your daughter be able to run the company after your passing? It's not rocket science you know, but then I've been in this caper for over 40 years! Remember that dividends do not reduce the exposure to CT, unlike wages etc which do. Also liquidation, a tad expensive, or selling it off could expose the capital gain to CGT at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of disposal. As you are going out of the business though Entrepreneurs' Relief could very well apply which limits the tax to a flat rate of 10% which in the long run might be advantageous and simplify the whole conundrum.
Customer: replied 2 years ago.
Sadly advice in the past overlooked some of the pitfalls. The business was a business, a small caravan park where we bought and sold caravans and charged pitch fee, we built a restaurant that we ran, all good fo entrepreneurs relief. In 2004 the restaurant was leased out and we built five small houses to rent on the park which apparently turned it into an investment business and no entrepreneurs relief. My daughter could easily run the business but I think I'm being advised that she would have to pay cgt on the value of the shares. How would the business get to her if I died. I think I've had more than my £32 worth from you, thank you
It would get to her through your will. There is no CGT on death, all assets being aggregated and the amount over the limit subject to IHT. The person who disposes of shares pays the CGT not the recipient and as I explained on death there is no CGT anyway. If you are content please be so kind as to rate me, You can still continue to follow up after rating.
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Thank you for your excellent support.
Just as an afterthought, if you give your daughter the company now and survive seven years after the gift it will pass to her IHT free. You will still be liable for CGT on the current market value of the company as at date of disposal. The UK has no gifts tax regime unlike France where it kicks in at 5K Euros.