Not all Liquidations are bad: solvent liquidations could leave your client quids in

The company has substantial cash reserves and the shareholders wish to draw these funds out whilst achieving the goal of paying as little tax as possible. (ESC) C16[1]
was the simple solution! Well it was up until legislators, under pressure from HMRC due to anti-avoidance narrowed the scope of the Concession and imposed a restrictive cap which came into force on 1^st
March 2012.

Typically those now affected tend to be consultants or contractors but any type of small business with cash reserves of over £25k could face this situation.

A solvent liquidation could help meet their needs by utilising the special treatment of fund distribution during a liquidation. All distributions to the company shareholders are classed as capital distributions. This means the distribution will be taxed as a capital gain with the potential for the first £11k to be exempt from tax and additionally Entrepreneur’s Relief could be applied so tax on any
balance is at 10%.

Alternative actions such as dissolving the company after extracting funds via dividends taxed at an effective rate of 25% will most likely mean that the shareholders will pay more in tax overall when compared to the tax payable and costs of the process involved with a Members Voluntary Liquidation (MVL).

How much can you save? … worked examples

The difference between a free range egg and a battery caged one?

Our Process [2] is streamlined and conducted by experienced and qualified staff. Unlike other offers you may have seen advertised online, we can deliver the funds back to you by way of an initial distribution within 2 weeks (see process) and our quick and efficient service allows us to have the whole process finalised in half the time of our online competitors.

How We Can Help You Retain Your Clients?
In the competitive business world, retaining clients is of paramount importance. When faced with a precarious financial position, getting free confidential financial advice from qualified Insolvency Practitioners is the most effective way to retain your client when they are in financial difficulties. The earlier the initial meeting, the greater chance there is to access a full range of rescue and recovery options.

Advisors, Accountants, IFA’s Consultants…Can You Trust Our Advice?
We have been giving insolvency advice for over 35 years. Our success is as a result of both our commercial acumen and commitment to customer service. Our relationship with our introducers is such that if they have any query… their client is in trouble or their clients major client is facing insolvency proceedings, they just give us a call for free no obligation confidential advice. “If in doubt, just give us a shout”

We welcome introductions and referrals and will always discuss a particular case to see if there is a possible solution.

Corporate Insolvency Assistance Fees
You know your clients better than anyone… In order to review the financial position of the company and prepare the relevant financial and statutory statements such as a Statement of Affairs or Declaration of Solvency we pay a fee to our introducers for helping to provide the information we require. The fee is ultimately dependent upon the case and work done on a time cost basis. If you are not sure if we can help, just give us a call or pop over to see us for a brief meeting and a coffee.

Please contact us for more information.

Footnotes

[1] (ESC) C16 Extra-Statutory Concession C16 under which up until March 2012 a company could simply distribute its remaining assets to shareholders and then either wait or seek to be struck off the Joint Stock companies Register and dissolved. The distribution was treated as a capital payment to be taken into account in determining the capital gains liabilities of the shareholders. This normally resulted in the shareholder paying less tax. For anti-avoidance reasons the legislation enacting ESC C16 has been narrowed following a revision from 1st March 2012. (ESC) C16 used to be the most valuable tax break available for owner managed company. Fear not the Members Voluntary Liquidation is here to stay..

[2] The process is…

At Kallis & Company we aim to set ourselves apart by making the process as simple as possible for the company owners. We will ask that the following actions have been taken:

1. Cease trading
2. Prepare accounts and corporation tax returns up to the period your client company ceased trading.
3. Settle all company liabilities, including tax liabilities
4. We will open a bank account in the company’s name in order that the bank balances are transferred to it ready to be distributed during the liquidation. The funds are then transferred to a liquidation account we open in company’s name.
5. A brief meeting will be set up, remotely if more convenient, to deal with the signing of paperwork. One document is to be signed in front of a solicitor
6. We will distribute the bulk of the company’s funds, some 90% – 95%, within 14 days of the Liquidation starting meaning that your client can enjoy benefiting from the tax efficient funds in a short space of time.
7. We will deal with filing of any outstanding tax returns and request tax clearance from HMRC. Once tax clearance is obtained, we will distribute the balance of funds held to the shareholders.