PHILIP A BECK
Licensed Insolvency Practitioner
41 Kingston Street, Cambridge CB1 2NU
Tel: 0800 1953605 (Free call) or 01223 367022
Fax: 0844 5048737
The directors may be wondering whether they can wind up a company themselves without the appointment of a liquidator, and the answer to that is, yes they can, however from 1 March 2012 the tax benefit of doing so is subject to a limit of £25,000 total sum distributed in anticipation of the dissolution of the company.
Normally, if a company distributes monies to its shareholders outside of a liquidation, the monies would be treated as dividends in the hands of the shareholders, and be subject to income tax, whereas distributions made during the course of a liquidation are treated as capital receipts instead upon which capital gains tax may be payable. Usually this would be beneficial for the shareholders. This is explained in more detail here . H M Revenue & Customs used to operate a concession scheme known as ESC C16 whereby they would allow a company to apply for an "informal winding-up" without passing a resolution for liquidation or appointing a liquidator, and then distribute its remaining funds as capital receipts to the shareholders. This effectively allowed shareholders to enjoy the same treatment informally as would have happened had things gone strictly by the book.
From 1 March 2012 ESC C16 has now been ended and replaced by legislation, which is explained in more detail here .
The effect of the new legislation is that for shareholders who are higher rate taxpayers, it is likely that for a company with more than £25,000 to distribute at the end of its life, the tax benefit to shareholders of placing the company into formal Members' Voluntary Liquidation will exceed the cost of the liquidation.
Philip Beck is a Licensed Insolvency Practitioner operating since 1996 with substantial experience in undertaking cost-effective liquidations, both solvent and insolvent. A members' voluntary liquidation can be undertaken for a fee as low as £2,000 + disbursements of a few hundred pounds. Multiple liquidations of group companies with common directors and shareholders can be undertaken for a fee from £1,500 per company + disbursements.
Please note that this site deals only with company and tax law in the United Kingdom of Great Britain and Northern Ireland. It is not applicable to other jurisdictions.
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