Tax Data

Help & Advice

Capital distributions on winding up

From 6 April 2016 there are restrictions on treating the final distribution as capital.

• The shareholder must have held at least a 5% interest in the company before the winding up.

• The company has to be a close company.

• In the following two years, the shareholder must not be involved, directly or indirectly, in a similar trade or activity.

• The distribution must not be part of arrangement to avoid tax.

• Where the capital distributed following the striking off exceeds £25,000 it is all treated as income.

• While a formal liquidation is more expensive, all of the distributions are deemed to be capital and potentially qualifies for ER.