Non-resident companies: examples of relief: TCGA92/S13(5A): company dissolved: payment to participators
This example illustrates the operation of TCGA92/S13(5A) if the company realises a gain, is then dissolved and there is a payment to the participators.
A UK resident shareholder owns half the shares in a non-resident close company. The company structure is straightforward and the UK resident is a 50% participator.
- The shares cost £10,000 in July 2009.
- In March 2010 the non-resident company sells an asset realising a gain of £100,000.
- The UK resident has no other gains in 2009-2010 but is chargeable to Capital Gains Tax at 18%.
- In July 2011 the non-resident company is dissolved. There is an excess of assets over liabilities. The liquidator makes a capital distribution to shareholders. The total sum distributed to shareholders is £200,000.
- The UK resident has no other gains in 2011-12 but is chargeable to Capital Gains Tax at 28%.
Capital Gains Tax treatment
March 2010 - The ordinary rules of TCGA92/S13 apply. Half the gain of £100,000 is attributable to the shareholder and is chargeable to Capital Gains Tax in 2009-10. The tax due is
|Section 13 gain||£50,000|
|LESS||annual exempt amount (say)||£10,000|
|CGT @ 18%||£ 7,200|
June 2011 - As an amount in respect of the whole of the gain has been distributed, the whole of the tax paid is available for set off. But a capital gain has now accrued to the shareholder because a capital distribution has been received from the liquidator. TCGA92/S122 applies.
The Capital Gains Tax liability for 2011-12 is
|LESS||annual exempt amount (say)||£ 10,500|
|CGT @ 28%||£ 25,060|
|LESS||Section 13 tax||£ 7,200|
|Tax due||£ 17,860|