Administration, winding up and purchase of own shares Flashcards
With regards to an accounting period, what happens when a company enters into administration?
When a company enters into administration, one accounting period ends and another one begins.
Thereafter future tax accounting periods follow the original accounting dates until the company either liquidates or leaves administration.
What happens to an accounting period when a liquidator has been appointed?
The accounting period ends and a new one begins when a liquidator has been appointed.
After this has happened then an accounting period will last for 12 months and continue until the company ceases to trade.
What is the treatment of assets passed to a shareholder when a company has been wound up?
All assets distributed to shareholders are treated as being deposals at their market value.
What are the group implications if a company goes into liquidation?
If a parent company goes into liquidation, then the group loss relief group no longer exists because it has lost beneficial ownership of its assets.
The chargeable gains group however still exists.
Under what circumstances does BADR still apply even when a company has ceased to trade?
BADR still applies if the individual who held the shares qualified for BADR 2 years before the company ceased trading.
What is the definition of a dissenting shareholder?
A shareholder who disagrees with the way a company is being run, so tries to exit the company by selling their shares.
What conditions need to be met, in order for the repurchase of a shareholders shares to be treated as a capital disposal?
Repurchasing company has to be unquoted.
The repurchase must benefit the trade.
The vendor must be UK resident at the date of repurchase.
The vendor must have held the shares for either 5 years or 3 years if they were inherited.
The vendor and their associates must reduce their interest in the company by at least 25%
The vendor must be unconnected after the repurchase. ( not holding more than 30% of the company or any of its group members)
What is one exception that can be used for the repurchase of shares to be treated as a capital distribution?
If the capital is being used to settle an IHT liability then a the capital conditions need not apply.
