Occasionally a solvent company gets struck off without the director(s)/shareholder(s) extracting all funds owed to them first. This is typically through carelessness, either:
Lost cash – The above happens more often than you might think. When this happens, any assets remaining in the company upon strike off become bona vacantia. The literal translation of this is “ownerless property”, any such funds revert to the Crown.
Personal liability for debts – Also of potentially greater concern for the directors is without the protection of the company they may inherit personal liability for any residual company liabilities.
Restoration – Getting a struck off company restored to the Register isn’t particularly easy or cheap, typically costing several hundred pounds and a court order, and taking several months. Therefore if the amount at stake is just a few hundred pounds or less, it’s not worth doing anything.
If the amount lost as bona vacantia is much more significant, then it may well be worth the hassle and cost of reinstatement.
So…you’ve got your company reinstated, and recovered the £X,000, now what do you do? Well, we’d suggest the same as if you’d just ceased trading yesterday. You consider the most tax efficient way to get the cash from that company into your own private ownership. What’s best will depend upon the balance, and your personal tax situation.
Under £25,000 – in this scenario, you can get capital gains tax (CGT) treatment on the distributions regardless of whether you go through a solvent liquidation process or simply get the company struck off. The latter typically costs £10 rather than a grand or two, so strike off will typically be the best route.
Over £25,000, won’t qualify for entrepreneurs relief – it may be that you won’t qualify for entrepreneurs relief. Perhaps the company ceased trading a long time ago, maybe it didn’t have a qualifying trade, or possibly you haven’t owned shares long enough. If so, it’s worth considering an MVL, but CGT without the benefit of entrepreneurs relief is often not much better (and occasionally worse) than dividends. Either way you’re likely to be paying quite a bit of personal tax. Get your accountant to run through calculations for CGT vs dividend.
Over £25,000, will qualify for entrepreneurs relief – in this scenario, a formal members voluntary liquidation is almost always your best option. If you’ve made no other capital disposals in the tax year, you’ll get ~£10k tax free, and the remainder will suffer only 10% tax. In almost every scenario an MVL is the most tax efficient way to get a lot of money out of a redundant Limited Company. See examples of tax savings via liquidation which can be made even after factoring in our low liquidation fees.