A distribution in a winding up made to an individual on or after 6 April 2016 will be treated as if it were a distribution where certain conditions are met. For the rule to apply, all of the following conditions must be met:
Condition A – The individual receiving the distribution had at least a 5% interest in the company immediately before the winding up.
Condition B – The company was a close company at any point in the two years ending with the start of the winding up
Condition C – The individual receiving the distribution continues to carry on, or be involved with, the same trade or a trade similar to that of the wound up company at any time within two years from the date of the distribution
Condition D – It is reasonable to assume that the main purpose, or one of the main purposes of the winding up is the avoidance or deduction of a charge to Income Tax.
A distribution in a winding up is not treated as a distribution under S396B to the extent that the amount of the distribution does not exceed the amount that would result in no gain accruing for the purposes of Capital Gains Tax, or where the distribution is of irredeemable shares.
For more information on bankruptcy, liquidation, administration and all the other insolvency procedures, or to take advantage of our free consultation and business health check, please telephone Stella Flemmings on 01377 257788, 01724 230060 or 01904 520116 and she will make you an appointment with one of our insolvency professionals at our Driffield, Scunthorpe or York offices. Meetings can be held virtually or in any of our offices whilst observing the socially distancing guidelines.