Extracting reserves form non-trading company

[Ignite]

I would be grateful for any thoughts on the following predicament:

A company traded successfully until a couple of years ago.
The company has now ceased to trade. Reserves of circa £1million are retained in the company.

The directors planned to liquidate the company and benefit from business asset taper relief. However, the Revenue felt that this ‘transaction in securities’ would have gained a tax advantage within S703 ICTA 1988. In view of this the directors decided not to liquidate.

The company is now non-trading with cash on deposit.

The directors believe that the most tax-efficient way of extracting cash is by way of dividends.

Is there a more tax-efficient way of extracting cash?

Are there any other problems that might arise in continuing the company in its current form?

Any help would be much appreciated.

[Bryn]

Hi there

If the company has any contingent liabilities from when it traded, the directors might choose to place the reserves into a Corporate Securities Trust. They could do this without paying any further tax, since the company has already paid tax to accumulate the reserves.

My contact details are below should you want further information.

Bryn Walker
Director

bryn@silver-planet.com