If the company is solvent and has more than £25,000 in non-distributable reserves, then a Members’ Voluntary Liquidation may be the answer.
This type of voluntary liquidation can be used in a variety of circumstances but enables the Shareholders to access their capital in the most tax-efficient way possible. Whereas distributions from a company are normally taxed as income, distributions from a Members’ Voluntary Liquidation can be treated as capital provided certain conditions are met. Some Shareholders may even qualify for Entrepreneurs’ Relief at 10% resulting in even lower rates for CGT.
The timing of the distributions can be decided by the Shareholders and spread over several tax years, if appropriate, to ensure that the maximum tax reliefs are available.
This procedure has other advantages in that it offers greater protection to Shareholders against claims of unauthorised capital distributions, non-cash assets can be distributed “in specie”, HMRC clearance is obtained before dissolution, and it limits the likelihood of unforeseen liabilities resulting in a potential restoration of the company in the years ahead.
Despite the fact that the company is solvent, an Insolvency Practitioner must be appointed as the Liquidator and there is a cost to the whole procedure. However, the costs of the liquidation will invariably be more than offset by the tax savings obtained.
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