Hi,
I have a limited company where the only asset is (around) £100,000 of overdrawn director’s loans. The company hasn't traded for over 2 years (and won't be in the future) so it has been suggested to me that I should close the company down by doing an MVL and having the loans distributed "in specie", thus benefiting from entrepreneurs’ relief. I have done a bit of research on this and stumbled across a couple of articles that say "HMRC is now running a test case to challenge this approach – seeking to reclassify the distribution of the loan as income rather than capital".
The solution seems to be to repay the loans before the MVL process begins but the problem I would then have would be how to raise the £100,000 that I would need to do so.
One article says "Regardless of the outcome of the test case, the new position seems likely to be enshrined in law when the Finance Bill 2017 finishes its passage through Parliament.".
My questions are, first of all, has this now become "enshrined in law"? If not, and if I were to go ahead without repaying the loans first, would it still be possible for HMRC to challenge what I had done and then reclassify the distribution of the loans as income? Indeed, even if I did repay the loans back first, would there potentially be any comeback from HMRC later down the line?
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