How do I close my company and minimise the tax I pay?

If solvent companies have achieved their original purpose, e.g. to be the vehicle for specific project, or the directors want to retire, it is important to obtain specialist advice regarding the most tax efficient method of distributing the net value of the company to its shareholders.

If they wish to cease trading and/or sell the business of the company and take their share of the proceeds of that sale, it is likely to be beneficial for shareholders to place the company into Members Voluntary Liquidation (MVL). Only by placing the company into MVL will the shareholders potentially qualify for Entrepreneur’s Relief which means that their receipt of cash or assets from the company will be taxed at only 10%. A MVL is a solvent liquidation which requires the directors to swear a declaration of solvency stating that the company will be able to pay its debts within a 12 month period.

The company will need to instruct an insolvency practitioner such as Chamberlain & Co (“CCo”) to advise the directors of the most appropriate course of action. CCo can assist directors and shareholders with identifying and completing the actions required to minimise the work which would ultimately need to be undertaken by the liquidator, thereby reducing the cost of the liquidation to a minimum.

Another potential method of distributing a company’s assets to shareholders is by way of a dividend and applying for the company to be struck off . However, this may only be tax efficient dependent upon the tax allowances and capital losses available to individual directors/shareholders and separate taxation advice should be sought from a tax specialist.

We are available to contact for free initial advice on 0113-2420808 or advice@chamberlain-co.co.uk