Thinking of winding up your company?

6th September 2017 | Posted in: Business Tax, Planning winding up company

Up until 5 April 2016, the distribution of cash to shareholders on the winding up of a trading company by a liquidator was usually subject to capital gains tax, potentially at the rate of just 10% with the benefit of entrepreneurs’ relief. However, the 2016 Finance Act introduced a targeted anti-avoidance rule that may now tax such a distribution as a dividend at income tax rates of up to 38.1% under certain circumstances. The new rules apply to distributions from 6 April 2016.

HM Revenue and Customs have issued guidance in an attempt to clarify when the new anti-avoidance rule would apply.

Broadly the anti-avoidance is intended to catch situations where the old company is wound up and a similar business is carried on by a connected business. Note, however, the distribution would only be taxed as a dividend at income tax rates if one of the main purposes of the transaction was to avoid tax. This is a complex area so please contact us to discuss your plans so you do not fall foul of the new anti-avoidance rule.

If you feel we could help you and would like to discuss any of the above, please contact Kenny McNeill CTA on 0131 317 7377 or email to kenny.mcneill@jsca.co.uk.
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