Tax on liquidating solvent company

[Pandora]

If a company accumulates cash, can the owner liquidate the company and assuming it's solvent, take the cash (net assets) and pay tax at the capital gains rate rather than personal tax rate?

Is there any anti avoidance or restrictions around this as it seems like a way to extract cash from a company at a lower rate of tax given that CGT is lower than marginal rate of income tax.

Any other tax issues to consider on liquidating a solvent company?

 

[Gordon Gekko]

It's not that much lower (12.5%/25% plus 33%).

It is possible, and it is possible to get retirement relief (thus avoiding CGT on up to €750k).

The primary anti avoidance is Section 817 which deals with such situations.

But it's generally a runner.

 

[RedOnion]

It can be a very useful option if you have capital losses elsewhere to offset the gain.

 

[dublin67]

There is specific anti avoidance here - section 817 TCA and it is very complex. Essentially if you liquidate a company and take out the retained earnings and start up a business in another company you can be deemed to have taken a dividend from the liquidated company and not a capital disposal. In essence you did not dispose of something - if you still own it, but in another company, you could get caught. There are bona fide exclusions which override the anti avoidance and these are complicated in themselves. Get some good tax advice from a tax consultant or an accountant specialising in tax.

 

[Palerider]

There is nothing at all wrong with what you have proposed, you have not indicated your intent post liquidation so no comment on that, you will have to appoint a voluntary liquidator, they will publish statutory notices in newspapers and set a date and location for the wind up meeting, agree a respectable fee with your choice of liquidator, it is straightforward and will take a few months just don't get hammered on fees.