Income or capital?

17 March 2009

Issue: 4198 / Categories: Forum & Feedback , Companies , Income Tax

An individual who is resident and domiciled in the UK owns all of the share capital in a Delaware company. If this company is wound up by a liquidator in the UK, and the company’s retained profits are distributed, would the payment be treated as an income or capital distribution?

I act for a UK domiciled and resident individual who is the sole shareholder in a company incorporated in Delaware USA.

The company was formed at a time when my client was non-resident and the company had no place of business or trading activity within the US and operated from Monaco where my client lived for many years.

He has since returned to the UK and re-established his residency here for taxation purposes and the company’s trading activity has now come to an end.

At the present time the company has approximately £3.5 million of retained profits; and since my client’s return to the UK the company has not been controlled or managed here and accordingly no UK corporation tax has been paid.

I have been led to believe that in Delaware there are no arrangements comparable to a liquidator being appointed in the case...

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