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Why would you liquidate a solvent company?

March 9, 2014 2:55 pm / 3 Comments on Why would you liquidate a solvent company?

Balance sheet business diagram

If you have a company which is no longer needed you have the following options:

  1. You can just keep it as a Dormant company
  2. You could strike it off at Companies House
  3. You could carryout a Members Voluntary Liquidation

If the company has assets the shareholders will want to release the assets and get hold of the money, so keeping it Dormant isn’t going to help.

Since March 2012, in the case of Strike Offs, ESC C16 has allowed the distribution of up to £25,000 as a Capital Distribution rather than as Income.

However, if you have assets in excess of £25,000 distributions can only be treated a Capital if the distributions are made through a formal liquidation.

With Entrepreneur’s relief, money paid to shareholders will only be subject to tax at 10% on the capital gain.

There could also be other benefits too.

steve@bicknells.net

 

The Risk-Based Approach – Risky business for SMEs? – Part I

February 18, 2014 7:00 am / Leave a comment

HMRC

HMRC (Photo credit: Images_of_Money)

The issue:

Risk-based approaches to manage Compliance Service delivery are undergoing a maturity model evolution.

This per se is not a negative issue, however, do risk-based approaches leave us exposed to more or less compliance risk?

We pose this question because a number of process advances, including technological drivers have over the past few years increased the incidence of the risk-based approach (r)evolution.

As an example, HMRC launched their risk based approach pilot scheme related to business record keeping called ‘Business Records Check‘ a few years ago (2011), only for the initiative to ‘go quiet’ and then suddenly to rear its head again late in 2013.

The facts:

From the HMRC web site, the following information was published:

“Up until 17 February 2012, 3,431 BRC had been carried out. These found that 36 per cent of businesses had some issue with their record-keeping of which 10 per cent had issues serious enough to warrant a follow up visit.“

By extrapolation, HMRC also publish within their background report the following table:

HMRC BRC Checks

It is clear that HMRC, via their risk-based approach, will target SME businesses they perceive as ‘at risk of keeping inadequate records‘, because of the additional tax yield they estimate to collect over the next few years.

The HMRC site goes on to state:

“A new approach to BRC started on 1 November 2012. Customers who are more likely to be at risk of having inadequate records will be contacted by letter to arrange for HMRC to call them to go through a short questionnaire.”

All this activity is part of an attempt by HMRC to close the ‘Tax Gap‘.

Next steps:

If you feel that your business records might not be up to the standard HMRC would acknowledge as adequate or if you feel potentially at risk, please contact one of the CIMA team members to assist you in evaluating your records, systems and processes for keeping adequate business records.

In a future article we will look into which specific activities put you or your business at a higher risk of a Business Records Check audit from HMRC.

©2014 – 3resource

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Financial Reporting – Strategic Report – Part I

January 9, 2014 7:00 am / 2 Comments on Financial Reporting – Strategic Report – Part I

CompaniesHouseNewLogo

In the excitement of an economic outlook rising like the incoming tide during the last quarter of 2013, together with the ‘silly season’ most of us would probably have missed Statutory Instrument No. 1970 – The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, and off course you would be forgiven for it.  This particular statutory instrument made the duty to provide a Strategic Report a part of UK financial reporting legislation.

To most us the update to the Companies Act 2006, Part 15 – Accounts and Reports, will not have any impact, if our our daily task is that of preparing annual statutory financial accounts for approval by the board of directors of a UK incorporated company.  This is because under section 414B of the Act, an exemption applies as follows:

414B Strategic report: small companies exemption
A company is entitled to small companies exemption
in relation to the strategic report for a financial year if—
(a) it is entitled to prepare accounts for the year
in accordance with the small companies regime, or
(b) it would be so entitled but for being or having
been a member of an ineligible group.
Financial Reporting (AICPA)
Therefore, if you prepare annual accounts based on the small companies exemption in section 477, namely:
477 Small companies: conditions for exemption from audit
(1) A company that meets the following conditions in respect of
a financial year is exempt from the requirements of this Act relating to the audit of accounts for that year.
(2) The conditions are—
(a) that the company qualifies as a small company in relation to that year,
(b) that its turnover in that year is not more than £5.6 million, and
(c) that its balance sheet total for that year is not more than £2.8 million;
then you do not have to be too concerned about the requirement to include a Strategic Report as part of the Annual Accounts ending on or after 30 September 2013.
If the answer is that you actually qualify, under the Act to include a Strategic Report, then in part II of this series of articles, we will set out the more detailed minimum requirements you will have to include, in order to stay compliant with the Financial Reporting requirements, as set out in the Companies Act 2006.
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©2014 – 3resource
* Quotes and references (sections) to the Companies Act 2006 available from Companies House
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