Dividends from removed companies

There have been two separate developments on what happens to the share capital of a company removed from the register at Companies House.

When you have simply finished with a company, it may be removed from the register under Companies Act 2006 s1000 or 1003, without the need for a formal winding-up. More than 300,000 companies are removed from the register each year this way.

Under extra-statutory concession C16, the share capital which is returned to shareholders may be taxed as capital and not as dividend. This usually means that less tax is paid. It is intended that, from 1 March 2012, this will be subject to a £25,000 limit. Any distribution of share capital above this figure is taxed as dividend income.

In a separate development, the Treasury Solicitor announced a change in the law. Strictly, this share capital is bona vacantia, meaning it belongs to the Crown. However, the Treasury Solicitor had announced that he would not seek to recover funds where the amount was below £4,000, as this was the estimated cost of a straightforward winding-up.
Unexpectedly, this limit has now been removed completely, so any sum may be distributed.

HMRC had proposed having the non-dividend limit also at £4,000, but consultees said this was too low.

Part of the thinking behind these changes is that company law now makes it much easier
to reduce share capital anyway.

If you plan to close a company that is no longer needed, we can advise you on how to minimise your tax liability.

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