The introduction below summarises the elements that are likely to be relevant to contractors, consultants and freelancers working through their own limited companies.
Entrepreneurs’ relief is an allowance that reduces the rate of capital gains tax to an effective rate of 10% when businesses are disposed of. This is not just selling a business, so the cessation of trade and winding up of a limited company can apply here under certain circumstances.
The conditions for Entrepreneurs’ relief to apply when winding up a limited company are as follows:
- The reasons for stopping to trade through the limited company must be for genuine commercial reasons.
- The company must be a trading company in the twelve months prior to disposal.
- The shareholder claiming the relief must have held 5% or more of the share capital of the company for a minimum of 12 months and those shares must bring with them at least 5% of the votes (any additional shares acquired over the 5% within the final 12 months are still eligible).
- The 5% or more of shares must have been owned for a minimum of 12 months.
- The shareholder claiming the relief must also be an employee or officer of the company and must have been so for a minimum of 12 months.
A limited company with distributable reserves of £25,000 or less can be wound up informally by application to Companies House. However, for companies with a greater balance than £25,000 remaining for distribution it has been necessary since new legislation in March 2012 to appoint an insolvency practitioner to formally liquidate the company via a members’ voluntary liquidation (MVL).
If you are a client of Integro Accounting your accountant will be able to guide you through the MVL process and introduce you to a licensed insolvency practitioner who can complete the liquidation for you.
Why choose Integro Accounting?
Integro Accounting provide a fixed fee limited company accountancy service to contractors, freelancers and consultants. Integro accounting was founded on the word integrity. Clients rate us 5/5 on Google and we pride ourselves on building a completely transparent and personal relationship with our clients. For just £100 + VAT per month, you can have a partner integral to your contracting career.
- All-inclusive price – no hidden charges, one comprehensive package.
- A dedicated accountant – one person who will support you every step of the way.
- Unlimited face to face meetings – offices available across the UK.
- FREE award-winning accountancy software – a FreeAgent license provided to all clients.
- 24/7 access to your accounts – complete visibility of your accounts whenever and wherever you are.
Speak to one of our expert accountants today on 0207 0962659 or email firstname.lastname@example.org for more information on how we can help you.