Closing down your Company

When the time is right to get rid of your limited company, whatever the reason may be, the most cost-effective way is to distribute the reserves to the shareholders and apply for the company to be struck-off. The costly alternative is to have a formal liquidation which can easily cost somewhere in the region of £7,500.

The problem with the cheaper route is that capital gains tax treatment, in the hands of the shareholders receiving something from the company, is not automatic (as would be the case under a liquidation). Instead certain conditions have to be met; if they are not, the receipts from the company are taxed as income instead.

Under proposals applying from 1 March 2012, the cheaper route will only be available on distributions from the company of a maximum of £25,000. This unwelcome move needs to be fully considered, so if and when your plan is to close the business down please talk to us to maximise the tax attractions. With care the rate of CGT will only be 10% which will usually be a good deal less than being charged to income tax.