SALE OF LTD COMPANY BUSINESS – SHAREHOLDER TAXATION

[Nick8060]

Hi, I’m looking for advice on the most tax efficient way of dealing with income from the sale of a small Ltd business. The business is over 5 years old, and is a drinks venue. It was built from nothing with only a minor amount (<£1k) invested in consumables.
There are two shareholders (50/50); one Class A and one Class B. One is HR tax payer and the other BR tax payer. Sale price is £22.5k which includes all assets except for cash at bank £20k.
Present view is to split the sale gain of £22.5k 50/50 between shareholders and apply the individual £12k CGT allowance so no tax is sufferable.
With regard to the bank balance, we would take £2k each as tax free dividend with the remaining £16k taken by the BR taxpayer as a dividend at 7% tax as it will not breach the BR threshold.
Are there any flaws in this initial plan? We are trying to be tax efficient but clearly do not wish to inadvertently evade paying the correct amount of tax.
Thank you
N

[AdamS93]

You seem to be confused.

Who has sold what? Have you sold the shares of the company or has the company sold its trade and assets? The answer to this will then determine the tax implications.

[Nick8060]

Hi,
Apologies for the lack of clarity. The Company has sold (or is planning to sell) it's trade and assets i.e. the present owners are selling the business in its entirety.
N

[AdamS93]

Company sells assets, company pays corporation tax on the gains it realises. The cash in the company can then be withdrawn from the company how the shareholders wish (presuming shareholders and directors are same individuals) and then taxed in the hands of the shareholders accordingly.

There will be no capital gains tax on the individuals personally unless the company is wound-up and the distribution from the company may be treated as a capital distribution.

[Nick8060]

Thank you AdamS93,
That position is much much different to the one I had in mind which would have, by the looks of it, lead to not paying the correct amount of tax. Your help is much appreciated.
Thank you.
N