Striking off without a liquidation: Time is running out ...

We wrote an e-bulletin under this heading recently advising readers of the changes that came into effect on 14 October 2011 in relation to Bona Vacantia and the limited time available to take advantage of existing Extra Statutory Concession C16 (ESC C16) to make a distribution to members.

HMRC have now clarified how the enactment of ESC C16 will operate and announced the new tax treatment will take effect from 1 March 2012.  This will mean that where a company has total net assets of greater than £25,000, a members’ voluntary liquidation (MVL) will be required for the distribution to be treated as a capital distribution.

This new treatment will mean that the existing ESC C16, which used to allow you to get clearance that any distributions in an informal striking off would be treated as capital distributions, will only be available if the total assets to be distributed do not exceed £25,000. The new legislation being introduced will mean that after 1 March 2012, if you need capital treatment, e.g. if Entrepreneur’s Relief is available, and the company has total assets of more than £25,000, then the company will have to go through a formal MVL to obtain this capital treatment.

An MVL can be initiated with great speed and immediately following the sale of business or disposal of assets. Of course, the MVL process can also incorporate these itself by way of a distribution in specie.

Johnston Carmichael is one of the leading providers of MVLs in Scotland and has significant expertise in the use of the process as part of a solvent restructuring through the use of s110 of the Insolvency Act 1986.  In house tax experts or, if applicable, the client’s own tax advisers will work closely with our Insolvency Practitioners to achieve the most efficient way of distributing assets to shareholders.

If you would like to discuss any point raised in this article further, please get in touch with your usual Johnston Carmichael contact or a member of our Business Recovery and Insolvency team listed below.

Edinburgh
Matt Henderson, Business Recovery and Insolvency Partner. 0131 220 2203. matt.henderson@jcca.co.uk

Aberdeen
Gordon MacLure, Business Recovery and Insolvency Partner. 01224 212222. gordon.maclure@jcca.co.uk

Glasgow
Donald McNaught, Director, Business Recovery and Insolvency. 0141 222 5800. donald.mcnaught@jcca.co.uk