Income tax or Capital gains tax

[Philip Hamer]

Clients accountant has informed them that on distribution of net assets from the sale of a property owned by their company, this distribution will be subject to CGT and not Income tax. Is this correct? Surely this is a dividend payment to the shareholders and therefore income tax applies. The Ltd Company owns a property and is planning to sell the property. They are not planning to sell the Company. Any help appreciated. Thank you

[pqtaxation]

Sounds like there is a disconnect in verbal communication -- the company will be liable for corporation tax on gain from disposal of property and individual shareholders to (higher rate only) income tax on dividends distributed.

[wamstax]

Perhaps the accountant is thinkingthat the company would be wound up - hence capital distribution- but ifit continues and dividend declared then the shareholders would be liable to any Higher rate tax if appropriate.
Of course the accountant might be looking to take advantage of the CG legislation to exempt £9,200 per shareholder and he might not be as dumb as you think:)
regards
bill@wamstaxltd.com
http://www.wamstaxltd.com