Company ceasing to trade

How is a loan write off to connected participator treated?

Loan amount is added back (no deduction available)

Purchased goodwill sold to related party at book value (£8k), MV is £12.5k, cost £20k

There will be an allowable loss on disposal based on diff between MV and cost

Guarantee made to investment company which 100% shareholder has an interest in

not deductible under the LR rules as not related transaction

no capital loss for guarantee payments as co is not a trading co

Is gift of stock allowable?

If it is sponsorship then yes

Are gifts to Community Amateur Sports clubs allowable?

Yes

When is a provision recognised?

If there is an obligation as a result of past event, it is probable transfer of economic benefits will be required and a reliable estimate can be made

What joint elections can be made on transfer of stock?

S167 and s178 - to transfer stock at the amount realised on sale, being book value. This removed requirement for stock to be deemed sold at MV

What can offset gains on leases?

Capital losses

What election should be made where assts are being sold to connected person?

Joint election to transfer assets at TWDV to avoid balancing charges

Tax consequences of releasing director from DLA

Treated as a distribution, as for a participator the distribution rules take precedence over any potential charge as earnings.

Taxed as dividend for director.

Unless there is evidence the loan was made by virtue of SH rather than director, company need to account for Primary and Secondary Class 1 NI

No CT deduction for loan write off

For sale of T&A - disposal of a lease?

Proceeds less the balance sheet value

For sale of T&A - F&F

Proceeds = current value

Less TWDV

Balancing charge / (Bal Allow)

For sale of T&A - Stock

Proceeds = current value

Less BS value

Gain / loss

how to calculate net proceeds if sale of T&A

Chargeable gain

Less CT payable

Less BS creditors

Plus cash

= Distributable profits

Less base cost of shares

= GAIN SUBJECT TO CGT

What could you do instead of liquidating company after sale of T&A?

Distribute the funds as income dividends over a number of tax years to utilise the BRB

Potential issue with capital distribution on a liquidation?

Can be reclassified as income if the individual commences new sole trader activity within 2 years after commencement of winding up under TAAR.

When does TAAR apply?

Nature of new activities are the same/similar to the trade of company

Purpose/one of main purposes is to avoid/reduce payment of IT.

What would advice be if you want to extract investment property on cessation of trade?

Extract prior to cessation as the gain can be relieved by the trading losses available.

who is an associate for CPOOS purposes?

Spouses and minor children