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Striking Off - V- Solvent Liquidation
Not a penny more.....
New rules being brought in by HMRC on 1 March 2012 will effectively ban the use of the informal winding up of companies to take advantage of 10% tax rates.
This announcement is largely in response to the growing trend of accountants advising their clients to leave profits in their company and then extract them at a 10% capital gains tax (CGT) rate on an informal winding up of their company.
From 1 March 2012, the new rules will mean that a formal liquidation will now be required if a shareholder seeks CGT treatment (as opposed to income tax treatment) on funds paid out of a company, where the funds exceed £25,000 (NB this threshold applies to share capital PLUS reserves).
This means that those clients wanting to rely on the "old" rules and apply for an informal striking off under ESC C16 will need to do so BEFORE 1 March 2012, or risk higher personal tax bills.
The formal liquidation procedure, known under the legislation as a Members Voluntary Liquidation (effectively a "solvent insolvency"), needs an insolvency practitioner to be appointed to administer the distribution of the funds. Whilst this will naturally give rise to additional costs, these will normally be relatively modest when compared to the significant tax savings that can be achieved.
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