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.