HMRC internal manual

Capital Gains Manual

CG64115 - Business Asset Disposal Relief: shares/securities: liquidation of company

You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.

Entrepreneurs’ Relief was renamed in Finance Act 2020 with effect from 6 April 2020.  The new name is generally used in this guidance but should be read as applying to times before that date.

TCGA92/S169S(2) makes it clear that a disposal of an interest in the shares in a company includes a disposal of an interest treated as made by virtue of TCGA92/S122. This treats a capital distribution in respect of shares as a disposal (or part- disposal) of those shares, see CG57825+.

Business Asset Disposal Relief is available, if the relevant conditions are satisfied, for capital distributions made in respect of shares disposed of as a result of the winding up of a company.

ESC/C16

For distributions which took place before 1 March 2012, extra-statutory concession C16 may be applicable where a company is wound up “informally”. If all the relevant conditions for ESC/C16 to apply are satisfied, distributions made in circumstances described in CTM36205 will be treated as if they were capital distributions made in the course of a formal winding-up.

The company is treated as if it had begun a formal winding-up either on the date the company declared its intentions to seek or accept striking off and dissolution, or at an earlier date if the company had then ceased to carry on business and commenced to distribute its assets. Distributions made during the course of a winding up are excluded by CTA2010/S1030 (previously ICTA1988/S209(1)) from the definition of distribution that applies for the purpose of income tax or corporation tax on income. But capital gains may arise on such capital distributions, see CG57825+ and CTM36220.

Business Asset Disposal Relief may be available in respect of a distribution which is treated as a capital distribution under ESC/C16.

CTA10/S1030A

Where distributions are made on or after 1 March 2012 as part of an informal winding up, the conditions for those distibutions to come within the capital gains tax rules are found at CTA10/S1030A.  There is a £25,000 limit. See CTM36220 for further details.

ITTOIA05/S396B/404A

From 6 April 2016, distributions on a winding up may be subject to a targeted anti-avoidance rule (TAAR). Further guidance can be found  at CTM36300+.