Whilst the tax benefits are a bonus with a members’ voluntary liquidation in the UK, closing the business must not be for the sole purpose of benefiting from paying less tax. HMRC’s Targeted Anti Avoidance Rules (TAAR), which is part of the Finance Act 2016, allows HMRC to challenge a shareholder’s distributions from a liquidated company if they believe that this was the main purpose. If it is decided that this was the principal reason for liquidation, a shareholder’s distribution will be re-classified as an income distribution and subject to higher tax rates, rather than as capital gains taxation.
If you are considering closing a solvent company via a members’ voluntary liquidation process, the first step is to seek professional advice. Our highly experienced professionals at Leading UK are on hand to help and advise you on the process.
