Tax Tip Week 16 – Closing a Limited Company – The ESC C16 Route
For Professional Contractors and Freelancers considering winding up their limited company; an application under Extra Statutory Concession C16 (ESC C16) may save personal tax.
Cash from a limited company is usually distributed to share holders as dividends. This is classed as income and the recipient will be liable for personal income tax on that amount; less personal allowances and the company tax credit already paid.
If the business is closing down, a final distribution of the assets can be made which is classed as Capital rather than Income, and this can save considerable personal tax for the shareholders. But the timing of the distribution is important, so are ensuring that your company can meet all the requirements.
For our full guidance please see - Closing a Limited Company - The ESC C16 Capital Distribution Route