Disincorporation

By Tolley
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The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Disincorporation
  • Tax consequences of disincorporation
  • Extracting cash from the company

Some proprietors may find that once operating through a limited company, the administrative burden and public filing requirements outweigh any benefits.

In order to provide relief for some small businesses that had incorporated and felt ‘trapped’ in the more onerous corporate tax regime, disincorporation relief was introduced by Finance Act 2013. This relief is only available for disincorporations that take place during the five-year period from 1 April 2013 to 31 March 2018 for companies that have goodwill, land and buildings which are valued at no more than £100,000.

The OTS published a focus paper  in July 2017 noting that take up of disincorporation relief had been low. There may be many reasons for this but as disincorporation relief is due to expire at the same time that the dividend allowance is due to reduce to £2,000 in April 2018, it might be worth reviewing business structures before then to establish whether it is still preferable to trade as a corporate entity post-April 2018. For details on this issue, see the Salary v dividend guidance note (subscription sensitive).

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