Close a company with a tax saving of over 40%

A solvent company that has ceased to trade can be closed in one of two ways; striking-off or Members’ Voluntary Liquidation.

Striking off is a cheap and simple process and if the surplus funds are less than £25,000 then this will be treated as a capital gain by the individual shareholder. However if they are more than £25,000 then the entire amount is taxable as income. Currently the effective rate of income tax can be over 50%.

Members’ Voluntary Liquidation is the statutory procedure whereby a Licensed Insolvency Practitioner is appointed and the company is formally wound up. The surplus funds paid out to shareholders are all treated as a capital gain. This means that if entrepreneurs’ relief applies that tax will be paid at 10%. In addition, distributions can be made over multiple tax years further increasing the tax relief available.

Conclusion

If a company needs to be wound up and has surplus funds of more than £25,000 then the shareholders should be advised to contact a Licensed Insolvency Practitioner.

Please contact either Ruth Duncan or Filippa Connor to discuss this further.

Posted Thursday, March 13th, 2014

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Testimonials

"I found Ruth and her team to be patient and approachable as they were always at the other end of the phone to answer any questions that we may have thereby providing us with comforting assurances as much as possible. They were also frank and candid in telling us where they did not have an answer."

Mr L Company Director

"Filippa's words of wisdom started me on a path of recovery and I will be forever indebted to her for her understanding and compassionate approach."

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"The liquidator is Filippa Connor, and from discussing the issues involved, I have found her to be thoroughly professional and alert to our concerns about the behaviour of [the company in liquidation]."

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"Ruth and her team helped me through a difficult time in a caring and supportive way. I know I can always go to Ruth for advice and guidance which will be given impartially and fairly for all parties concerned. This is very much an open, clear and professional relationship which I appreciate."

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