Our client was a trading company owned 50% each, by husband and wife. The company had traded successfully for many years and had built up a large reserve of cash that was principally held on deposit account.
The owners also had substantial cash reserves and property income in their personal names and were higher rate taxpayers.
The owners had decided that they wanted to retire from the business. They were aware that as higher rate taxpayers, any dividends taken from the company would constitute their personal income on which they would have to pay at least a further 38.1 Income Tax, and they were not enamoured by the prospect of losing £300,000 of their retirement fund.
Fortunately they had spoken to us in advance of their retirement and we were able to set their minds at rest. A solution was available. With our help, we arranged one of our liquidator contacts to put the company into a Company Voluntary Liquidation. All debts were paid and there was no question of there being any black marks against the company or its directors.
Once the company had been liquidated, the funds were distributed to its members and these were subjected to Capital Gains Tax, not Income Tax. Since the company and the individuals met the criteria for Entrepreneurs’ relief the ultimate tax payable was at just 10% which we are pleased to say our clients regarded very much as a result.