New queries, issue 4593

Separation anxiety

Treatment of profits in limited company when director/shareholders part ways

We act for a limited company which was trading in the construction industry and has accumulated reserves of undistributed profits in the region of £800 000. There are four equal shareholders being two couples who are all directors.

One of the husbands has now retired on health grounds aged 57. The other director and his wife wish to continue with the business. The original intention was to wind up the company and for the continuing director and his wife to form a new company to continue the trade.

We understand the distribution on the winding up of the first company will qualify for capital gains tax treatment for the retired director and his wife but we believe the director and his wife who wish to start up a new company within two years will be...