), but it is sometimes necessary due to the nature of the company’s business – ask your accountant to advise you.
This form of liquidation is also known as “striking-off”, or “an ESC C16”.
A formal liquidation must be done by a specialised accountant called a “licensed insolvency practitioner”.
It tends to be expensive (not least because in some circumstances a licensed insolvency practitioner can become personally liable to the company’s creditors if he gets things wrong!
This will be treated as a disposal of their shares for CGT purposes, and so they will pay CGT based on the cost of their shares, and how long they have owned them.
GOLDEN RULE: Do not assume that liquidation will always be better than a dividend.
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Looking at a dividend first, then at liquidation: It would have been all too easy to rush into a liquidation that would have cost them nearly £100,000 in tax.This article was first printed in Business Tax Insider in July 2006.My accountant and I need absolutely accurate and the most up-to-date advice that we can possibly get.Unless the company plans to use this cash to start a new business venture, of course, the question is how to get the cash out. If the company pays the cash out to its shareholders as a dividend, they will suffer income tax at 25% on that dividend (assuming they are higher rate taxpayers).The alternative is to wind up the company and distribute its assets to its members.