The First Delegated Legislation Committee of the House of Commons has approved the recent enactment of Extra-Statutory Concessions Order 2012 giving legislative effect to six extra-statutory concessions (ESCs), including ESC C16 ( http://www.taxpartnersuk.com/news_detail.php?news_id=76 ), which covers the tax treatment of distributions to shareholders when a small company is dissolved.
With this change Part 23 of the Corporation Tax Act 2010 and s.122 (5) of the TCGA remain amended as follow:
In section 122 of the Taxation of Chargeable Gains Act 1992 (1), after subsection (5) insert—
“(5A) The reference in subsection (5)(b) to a distribution in the course of dissolving a company includes a reference to a distribution to which section 1030A(3) of CTA 2010 (distributions prior to dissolution of company) applies.”
Similarly Part 23 (Ch.3) of CTA 2010 remains amended as follows:
1030A Distributions in respect of share capital prior to dissolution of company
(1) This section applies where—
(a) the procedure in section 1000 of the Companies Act 2006(2) (power to strike off company not carrying on business or in operation) has been commenced in in relation to a company, and
(b) the company makes a distribution in respect of share capital in anticipation of its dissolution under that section.
(2) This section also applies where—
(a) a company intends to make, or has made, an application under section 1003 of that Act (striking off on application by company), and
b) the company makes a distribution in respect of share capital in anticipation of its dissolution under that section.
(3) The distribution is not a distribution of a company for the purposes of the Corporation Tax Acts if conditions A and B are met (but see section 1030B).
(4) Condition A is that, at the time of the distribution, the company—
(a) intends to secure, or has secured, the payment of any sums due to the company, and
(b) intends to satisfy, or has satisfied, any debts or liabilities of the company.
(5) Condition B is that—
(a) the amount of the distribution, or
(b) in a case where the company makes more than one distribution falling within subsection (1)(b) or (2)(b), the total amount of the distributions, does not exceed £25,000.
(6) In the case of a company incorporated in a territory outside the United Kingdom, any reference in subsection (1) or (2) to a section of the Companies Act 2006 is to be read as a reference to any provision of the law of that territory corresponding to thatsection.
1030B Section 1030A: effect of company not being dissolved, etc
(1) Where this section applies, a distribution made by a company is to be treated for the purposes of the Corporation Tax Acts as if section 1030A (3) had never applied to it.
(2) This section applies where 2 years have passed since the making of the distribution and—
(a)the company has not been dissolved during that time, or
(b)the company has failed—
(i) to secure, so far as is reasonably practicable, the payment of all sums due to the company, or (ii) to satisfy all of its debts and liabilities.
(3) In a case where this section applies, all such adjustments as are required in order to give effect to subsection (1) are to be made, whether by the making of assessments or otherwise.”
The amendments take effect on 01 March 2012.
