Tax on a liquidating distribution

However, where a transaction falls on or after 6 April 2016, any clearance granted by HMRC under the current TIS rules will no longer be valid – so a new clearance would need to be sought under the new rules.Therefore, it is preferable for winding-ups to be completed before 6 April 2016 where this could be problematic. This change will allow for HMRC to target ‘money boxing’ (where excess profits are retained in the company and extracted by way of capital on a liquidation) and ‘special purpose companies’ (where individual projects or contracts are carried out by separate companies so that on completion, they can be extracted by way of capital on a liquidation, instead of the extraction of regular dividends).By continuing to use our website, you agree to our use of such cookies.The South African Revenue Service (SARS) released Binding Private Ruling 210 (Ruling) on 11 November 2015.

Step 2In terms of an amalgamation agreement as envisaged in s113 of the Companies Act, No 71 of 2008 (Companies Act), the Applicant and Co-Applicant will be amalgamated as follows: For purposes of the Ruling, it has been assumed that the shareholders of the Applicant hold the shares in the Applicant on capital account.section 110 reconstructions), however, HMRC have confirmed to Mazars that the provisions within the TAAR are not intended to have any impact in these cases, because the distributions are made to new companies rather than directly to the individual shareholders.Any shareholder director who had already been intending to retire and wind up their company should consider whether this can be done before 6 April 2016, to avoid any possible risk of the new two year rule biting, should they later change their minds and start up a similar business, or become active in a similar business run by a connected person.For further information contact David Reynolds , Rosey Blundell or Chris Williams .We use cookies to improve your user experience and measure the use of our website.

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This specifically targets ‘phoenixism’, where profits are retained within a company, the company is wound up (with the individual shareholders benefiting from capital treatment), followed by any of the individuals setting up a business carrying on the same or similar trade or activity within two years of the winding up.

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