Taxation of liquidating

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· Finally, the company applies to the Registrar of Companies to be “struck off” the Register of Companies.

Once the Registrar has done this the company is dead – though, like Dracula, it can sometimes be revived if unforseen liabilities appear.

Although it is seldom the most tax efficient way to dispose of a company, this route is often forced on the vendor because the purchaser refuses to buy the shares instead, for the reasons already explained earlier in this section.

Once the assets of the business have been sold by the company, and it has paid the resulting corporation tax on its gains, we are left with what is sometimes known as a “cash-box” company – that is, a company whose only asset is a large bank balance.

A liquidating dividend is also called liquidating distribution.

Taxation of liquidating

A liquidating dividend may be made in one or more installments.

The ex-dividend date is typically set for two business days prior to the record date.

This is due to the T 3 system of settlement financial markets presently use in North America.

Notice also that the saving does not entirely depend on using Jane’s lower rates and exemptions – Steve, who pays higher rate tax on all his gains and income, saves £48,980 by taking a dividend.

Essentially, it all depends on the rate of CGT that the shareholders will pay on their gains if the company is liquidated.

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