The UK Government is concerned that the current capital distribution regime is being used as a tax avoidance measure - new legislation from 6 April will mean the rate of tax will increase from 10% to 38%
Following a consultation document published in December, new legislation is to be introduced in April which will bring in significant changes for individuals who wish to take advantage of capital distributions available from a Members Voluntary Liquidation (“MVL”).
This legislation will not apply to corporate shareholders only individuals who are shareholders and will affect almost all small companies as close companies are included.
The government has become concerned that payment of tax is being avoided in the current capital distribution regime (eg by owners of numerous different businesses or property developers) and therefore distributions (after 6 April irrespective of the date of liquidation) via an MVL will now be considered as income rather than capital. This change will result in a considerably higher tax charge.
Furthermore the MVL process cannot be used for tax advantage purposes and beneficiaries of a distribution cannot be involved in a similar business or trade for two years after the distribution.
If you want to speak to an expert advisor or require further information please contact Jeremy Frost, Patrick Wadsted or Anthony Ford who will advise you on the options available to liquidate your company in the most tax efficient manner. Call us in confidence on 0845 260 0101. Prices start from £850 for our fixed fee bronze service MVL.
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