Reapyment of capital from company?

[DBrown]

I am director and sole shareholder for a (very) small limited company.

I intend to reduce the share capital from £9000 to £1000 by using the Solvency Statement.

Assuming I do this what is the most efficient way to repay/return the £8000 to me?

The money being repaid is simply that which I put into the business. ie the price per share is the same as that originally paid for the shares.

Is this seen as a straight repayment not subject to tax or is it seen as a distribution subject to tax?

Any help would be much appreciated - if only a pointer to the most recent legislation covering this.

Thanks.

[DBrown]

**Repayment** - that will teach me not to preview.

[wamstax]

straightforward repayment of share capital at the subscription price would not give rise to a distribution. However you would have to watch out if there was a bonus issue of shares before or after the repayment of share capital that could give rise to the distributions applying
see http://www.hmrc.gov.uk/manuals/ctmanual/CTM17505.htm

[DBrown]

Thank you very much for the reply.

There are no bonus shares involved - so I assume that the cash can simply be paid to me and there are zero tax implications (for me or company) - is that correct?

[AvocadoK]

I would recommend you get clearance from HMRC on this. I have seen two cases this year where HMRC have not readily agreed that there is in fact 'zero tax to pay.' By seeking advance clearance, you will at least avoid the uncertainty of an HMRC enquiry after the event.
Regards
AK

[DBrown]

Thanks for the advice.

Out of interest did the cases in question relate to some kind of 'bonus' share issue do you know?

[AvocadoK]

No, there had been no previous bonus issues. HMRC still seem to think that the anti avoidance legislation on transactions in securities may apply. I think they are wrong, but it is better to have that argument before the transaction rather than afterwards!
AK