Replies to Queries - 4

A client runs a computer consultancy company with his wife which is caught under IR35 as both he and his wife undertake 'relevant engagements'. As there is about £150 000 of cash in the company it has been suggested that they liquidate the company (informally under the Extra-statutory Concession C16 procedure) and take advantage of the 10 per cent capital gains tax rate after 5 April 2002. They would then create a new company and carry on doing what they previously did.

Would this work? I fear that it would be caught as a transaction in securities - but are directors to be compelled to draw all accumulated funds as income?

(Query T15 983) - Morris.

'Morris' is right to be concerned about the transactions in securities legislation. Where payments are made under a liquidation or a striking off...