The last Tax Bite prompted an unprecedented response from liquidator Tax Biters!
By way of quick recap, we were discussing a test case that HMRC have taken to argue that a director’s loan account which is distributed in specie should actually be taxed at dividend tax rates of up to 38.1% rather than much more beneficial capital gains tax rates which can be as low as 10% (and which is the ‘traditional’ treatment).
The take home message was that loans should not be distributed in specie as part of a liquidation until further notice.
I suggested that one way of solving this problem would be to secure a bridging loan as follows:
Rather than securing a loan for the full amount of the loan account which in practice could involve quite a lot of hassle and expense there is another solution which has been suggested by a few liquidators who are facing this issue in practice.
This means that a £500,000 loan has effectively been repaid using £25,000. This creates a bit of extra hassle for the liquidators who have to make more distributions but this cost is likely to be outweighed by the benefit of not having to go through the hassle of arranging a bridging loan.
You can use this form to request us to give you a call or if you prefer just leave us a message. Please be sure to leave us a contact number or email address for you and we will get back to you as soon as we can.