Voluntary strike off of company with over £25,000 profits

I am closing a company that has profits of £50,000 using a voluntary strike off. If I pay £25,000 to shareholders as a dividend income, can I then, in the same tax year, pay the remaining £25,000 to shareholders with this treated as a capital gain? I believe that if the two payments happened in separate tax years, then the tax treatment above is fine but am not sure if both payments can happen in the same tax year and still be entitled for shareholders to treat the second payment as a capital gain. Thanks.

Hi tws1 Spanner,

Please refer to guidance set out at CTM36220 - Particular topics: company dissolution: distributions, specifically the condition regarding the amount of the total distribution
for this statutory provision to apply.

Thank you.

Hi, Thanks for your reply. I am afraid I am finding it difficult to interpret the guidance CTM36220, which you referred me to. I think the guidance is saying that if I wish to voluntarily strike off a company with profits of more than £25,000 to distribute to owners then there needs to be a gap of two years between the final and preceeding distribution of profits in order for the last distribution (if less than £25,000) to qualify as a capital gain for the receiving shareholders rather than being dividend income. Am I correct in this interpretation please? Thanks.

Hi tws1 Spanner,

If two years have passed since the making of a distribution and the company has not been dissolved, or has failed to satisfy the first condition mentioned at CTM36220, then it is treated as if the relief from CT distribution treatment given by CTA10/S1030A had never applied.
That is to say the capital treatment for the remaining £25,000 is lost and the CGT liability that would arise on such distribution must be paid. 

Thank you.

Thanks for providing this reply which I am grateful for May I try to re-phrase my question as I feel the reason I do not understand your replies is that perhaps the points you make are not relevant to the question I am asking. I wish to voluntary strike off a company with remining profits of £50,000. I wish to pay a dividend of £26,000 to the shareholders which I believe HMRC will treat as dividend income for tax purposes. I then wish to pay the remaining £24,000 to the shareholders WITHIN THE SAME TAX YEAR. I would like this £24,000 to be treated as a capital gain for the shareholders, rather than dividend income. Is this treatment of the £24,000 as a capital gain acceptable to HMRC? Thanks.

Hi tws1 Spanner,

The £24,000 will be treated as a distribution, not a capital receipt in the hands of the shareholders.
There will be 2 distributions: one of £26,000 and one of £24,000. The shareholders will have received a total distribution of £50,000.
Please see the guidance on the gov.uk website in HMRC’s Company Taxation Manual at CTM36220.

Thank you.