Corp Tax - Chapter 26

Question 1

Distributions made in respect of share capital prior to dissolution are treated as capital where a company:

Answer 1

power to strike off a company not carrying on a business or in operation

intends to make or has made an application under s.1003 CA 2006 - DS01

Collected all debts and paid all liabilities due.

Cap on total distributions by the company of £25,000

Question 2

What happens if distribution cap is exceeded?

Answer 2

Excess taxed as income

Question 3

Time limit for dissolution

Answer 3

2 years

Question 4

Phoenixing rules apply when:

Answer 4

• immediately before the winding up, an individual has at least 5% of the shares in and voting rights of the company;
• the company is a close company when it is wound up, or at any time in the period of two years ending with the start of the winding up (treating a non-UK resident company as close if it would have been close had it been UK resident);
• at any time within the two years carries on a trade which is the same as, or similar to, the trade
• it is reasonable to assume that the main purpose, or one of the main purposes, of the winding up is the avoidance or reduction of a charge to income tax, or the winding up forms part of arrangements of which the main purpose or one of the main purposes is the avoidance or reduction of a charge to tax.

Question 5

Avoiding the cap

Answer 5

Pay a dividend first, to reduce reserves

Question 6

What is the cap?

Answer 6

£25,000

Question 7

Loans to participators

Answer 7

If the loans to participators are repaid to the company prior to dissolution, there should be no difficulty.

Where a loan is repaid more than nine months after the end of the accounting period in which it was made, repayment of the s.455 tax is deferred until the due date for the accounting period in which the repayment takes place. The practical effect of this is that the company cannot dissolve itself under s.1003 CA 2006 until the repayment of tax is due