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KEY POINTS
- HMRC has changed its practice on two aspects of a company winding-up.
- The department considers that statutory interest will apply from the start of a liquidation or administration.
- The application of statutory interest rather than a later charge under TMA 1970 can result in a substantially increased liability.
- HMRC is also understood to be charging an in specie distribution of an overdrawn directors’ loan account as income rather than capital.
- The income distribution will cause entrepreneurs’ relief to be lost and an increase in tax liability.
Business owners and advisers must be on their guard when completing a solvent winding-up through a members’ voluntary liquidation (MVL) due to policy changes HMRC is understood to have made. MVLs are used widely when business owners retire or as a mechanism to unlock the...
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