Question:
My company is going through liquidation. My reserves are over £25,000 and the liquidator has made two capital distributions; on 31 March 2014 and 30 April 2014. Can I claim entrepreneurs’ relief for the two tax years concerned?
Arthur Weller replies:
HMRC’s Capital Gains manual (www.hmrc.gov.uk/manuals/cgmanual/CG64115.htm) makes it clear that entrepreneurs' relief (ER) is available on a winding up of a company. If it is a formal liquidation, CTA 2010, s 1030 provides that distributions received in respect of share capital are normally treated as capital receipts, even if those distributions are more than £25,000. However, the ER rules must be complied with. See www.hmrc.gov.uk/manuals/cgmanual/CG64045.htm regarding the timing of the disposal of the shares vis-a-vis the cessation of business by the company.
