Distribution in Specie update

Posted by amandaireland - December 19, 2019 10:15 am Update on HMRC’s position on Distributions in Specie in Solvent Liquidations

You may recall that I wrote a blog in May 2018 to advise that HMRC were to be charging an in specie distribution of an overdrawn directors’ loan account as income rather than capital.  This would result in a loss of entrepreneurs’ relief and consequently an increase in the directors’ tax liability.   Therefore for some time now, we have advised all directors to repay their directors’ loan accounts prior to winding up a solvent company.

Since then, there have been all sorts of rumours about cases being taken to tribunal, but the only evidence I have heard of, is that there have been letters from HMRC agreeing not to raise the charge when challenged. 

Insolvency conference

At an insolvency conference in late 2018, a representative of HMRC said they did not have an issue with distributions in specie and something would be issued to confirm that.

As far as I am aware, no official announcement has been made to date, however HMRC has made a copy of its internal guidance available here.

This appears to resolve any uncertainty, as HMRC have clearly set out that such distributions will not attract a section 415 charge.

For help and advice regarding a Members Voluntary Liquidations please do not hesitate to contact me or Alison Collier on 01795 433655.