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HMRC internal manual

Capital Gains Manual

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

  Proceeds   £100,000
LESS cost   £ 10,000
      £ 90,000
LESS annual exempt amount (say)   £ 10,500
      £ 89,500
  CGT @ 28%   £ 25,060
LESS Section 13 tax   £ 7,200
  Tax due   £ 17,860