Dissolution of companies – Update on ESC C16
The First Delegated Legislation Committee approved the Statutory Instrument The Enactment of Extra Statutory Concessions Order 2012 on Monday 30 January which included a change to the old ESC C16
(see link http://www.legislation.gov.uk/ukdsi/2012/9780111519134/article/16 ).
This means that distributions which are made on or after 1 March 2012 in anticipation of a dissolution and which exceed £25,000 will be subject to income tax and not capital gains tax.
The way to preserve capital gains tax treatment will then be to enter a formal liquidation but that may be a rather expensive exercise.
We would recommend that clients wishing to dissolve a company and extract the assets should try to beat the 1 March deadline and dissolve the company concerned under the ESC C16 rules.
There is no limit, or cap, on the amount of the distribution that can be made under ESC C16 and be subject to CGT.