Company wind up queries

[PunZ]

Hello:

I hope someone can help with this, sorry if complicated! Any opinion appreciated!

A retired friend is a director and 50% shareholder of a small commercial property rental company along with her director-shareholder sister who also has 50% shares. The shares my friend has were left to her by another director on his death in 2018. The properties and business were professionally valued at that time for the purposes of probate. The commercial properties were then sold recently with a view to winding the company up so all the business assets are now in cash.

Initially the idea was to simply get final accounts done, pay all the relevant business and property taxes, strike the company off when the relevant time period had passed and distribute the remaining cash. This is what my friend understood from the company accountant would be happening.

My friend was happy to pay any personal tax due on her share of the cash (though she has been told by the accountant that there may not actually be any due to the probate valuation) - she just wants the business finished with.

However my friend’s sister was concerned about her own personal tax liability since she was given her shares on her husband's death in 2010. Apparently the probate valuation done of the properties and business at the time was incorrect and so the sister understands there will be tax to pay on any gain now. The sister thought of carrying on the business herself and taking a tax-free dividend for herself for the next however many years to avoid paying tax on the gain. My friend in that case was happy to sell the shares back to the company and take her half of the cash, as it were, and of course still pay any taxes due for herself.

Now the company accountant has advised that the company should go down the MVL route, advising the sister also to go to the probate office and ask them to change the incorrect valuation (it will still be under the 325k threshold) to try and reduce her tax liability.

My friend is concerned at whether this is good advice from the accountant:

Can her sister just go back and change figures to suit like that with no penalty? How long does that process of trying to get figures changed actually take (as my friend is keen to leave the business and the sister has already had plenty of time to look at her tax affairs and make a decision).
Will her sister attempting to change values like that have any consequences for the business itself?
Is the MVL route really the way to go since it is a small company i.e. less than 250k?

Finally, what are the options for my friend:
Can she still sell the shares back to the company? Will there be stamp duty to pay?
If the sister doesn't agree to that, can my friend sell them to someone else thus forcing the issue (since there are pre-emptive rights in the company articles and my friend's sister won't want anyone else to have the shares). What would be the tax implications there?

Thanks in advance!

[AGoodman]

Not really my area but this concerned me:

"My friend in that case was happy to sell the shares back to the company and take her half of the cash, as it were, and of course still pay any taxes due for herself"

A share buy back is an income distribution by default and I'm not sure if it can receive capital treatment when the company has ceased trading. That could leave your friend with a substantial income tax liability.

[PunZ]

Hi thanks for your response.

Having done some more reading online I think you're absolutely correct about that tax liability!