LOGO 4

Closing a Business

There is an important piece of legislation called ESC 16 which basically states that what’s left in a company on closure can be distributed to the shareholders as a capital distribution rather than as a revenue distribution as long as the amount does not exceed £25,000 without the company going through a formal dissolution process.

What this means to the layman is if there is less than £25K left in the company you can have the company struck off and distribute whats remaining as capital and not dividends.

Capital distributions are subject to capital gains tax rather than income tax  and so you can take advantage of the yearly tax free capital gains tax allowance and the tax rates are taxed at 18% or 28% rather than income tax rates.

If there is more than £25,000 left in the company then it may be beneficial to appoint an official insolvency practitioner and go through a formal dissolution of the company via something called a Members Voluntary Liquidation. This will also mean that what’s left in the company will be distributed as capital rather than income but there will be fees to pay to the liquidator

It all depends on the personal circumstances of the shareholders and of course professional help should be sought in all cases.

If you need further help and advice please do not hesitate to contact me at [email protected] or call me on 0845 680 7084

Disclaimer:

Paul Marks & Co Chartered Accountants is the trading name of Paul Marks Ltd a Limited Company registered in England and Wales (registered number 4487645). This article is designed for the information of readers only and readers should not act on any of the information contained in this article without seeking professional advice. Nothing in this article constitutes advice, nor does the transmission, downloading or sending of any information or the Material create any contractual relationship. Links to third party websites are provided as a convenience to the reader, Paul Marks Ltd does not control and is not responsible for any of those websites or their content. Paul Marks Ltd accepts no liability or responsibility whatsoever for any loss or damage suffered by any user of the information contained on or accessed through this article or the Material downloaded.