Tax on a liquidating distribution

section 110 reconstructions), however, HMRC have confirmed to Mazars that the provisions within the TAAR are not intended to have any impact in these cases, because the distributions are made to new companies rather than directly to the individual shareholders.Any shareholder director who had already been intending to retire and wind up their company should consider whether this can be done before 6 April 2016, to avoid any possible risk of the new two year rule biting, should they later change their minds and start up a similar business, or become active in a similar business run by a connected person.This is a significant extension to the scope of these provisions, although ‘normal commercial transactions’ (i.e.

These draft provisions are so wide they will even apply, if enacted as currently drafted, where the individual is only involved in the trade or activity of a business carried out by a person connected to him (such as a family member).

The TAAR may also catch ‘special purpose companies’ set up for individual contracts (as detailed above). Firstly, the TAAR will not apply to cases where the assets distributed represent irredeemable shares in a subsidiary of the company – this would apply in the case of certain non-tax neutral demergers (i.e.

where a holding company is liquidated, the shares of its subsidiaries are distributed directly to the individual shareholders, and the shareholders are subject to capital gains tax on the value distributed).

It is nevertheless always recommended that advance assurance from HMRC be sought in all such cases to confirm that they will not impose these provisions on a transaction.

These changes will apply to any transaction which occurs on or after 6 April 2016, or all transactions within a series, where any one or more of them occurs on or after 6 April 2016.

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