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Back to basics: Tax on the winding up of a company

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A company is a separate legal entity so when it is no longer required it has to be wound up otherwise the company will remain in existence as a dormant company. There are tax issues that need to be considered both for the company and for the shareholders. When a company is wound up it will dispose of all its assets either by way of sale or by way of distribution in specie to the shareholders. Any losses incurred by the company up to cessation of trade can be carried back three years. The timing of expenses up to cessation of trade should be considered so as to ensure that corporation tax relief is obtained. The shareholders will need to consider their CGT position and may also need to bear in mind any income tax implications. There are implications for the availability of loan interest...

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