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Feb
28th

ACT NOW OR LOSE OUT By: Clare

When relevant conditions are met, a company can treat the proceeds of winding up a company as capital, which is then subject to capital gains tax.  This has been allowed because of a concession from H M Revenue & Customs called ESC C16.  Without this concession distributions on winding up should be treated in a similar way to dividends and chargeable to income tax.

This makes a big difference to the ultimate tax liabilities as the differences in the tax rates for capital and income are currently so great.  Also with the additional possibility of Entrepreneurs Relief giving only a 10 % tax rate the use of the concession is even more appealing.

However, change is on the way.  HMRC is proposing changes which will limit the capital distribution on winding up a company to £4000 where a liquidator is not appointed.  This will add to the complexity and costs.

These changes could be announced as early as the Budget on 23 March, so for more help and advice please contact us at Haxton Chartered Accountants West London.

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