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GET(Initiate)Initiate
13 Dec 2024

I've moved to Australia in October 2024 and have been running a company(director) for more than 5 years in the UK. I'm planning to liquidate the company in the UK using Member voluntary Liquidation (MVL) say in Feb 2025, whereby the shares/distributable profits are then put as Capital Gains after a one-off deduction is made.


Let's say the company had distributable resevers of £120,000 and after tax and reductions, the tax/deductions say £100K was put into director as Capital Gains, which will be shown in UK self-assessment as Capital Gains for UK Financial year


Putting as a timeline and assuming following values


  1. Company Distributable profits or Valuation of company when I became tax resident of Australia (Oct 2024) => £110K
  2. Gained valuation/profit from Oct24 till Liquidation (Feb 2025) => £10K


Is my understanding correct below?


  1. From an Australia tax calculation, the CGT will be effective only for the £10K (gained valuation) once I became resident?
  2. Since the company has been owned for more than 12 months and qualifies as a CGT asset, the 50% CGT discount applies. This means only £5K (50% of £10K) will be included in your taxable income in Australia?
  3. Who should be giving the valuation of the UK Business at October 2024? An Australian Accountant or a UK accountant?


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2 replies
406 views
2 replies

Most helpful response

Most helpful reply

AriATO(Community Support)Community Support
15 Jan 2025

Hi @GET,


Your understanding of the CGT situation isn't quite correct.


Firstly, you're deemed to acquire the shares in the company for Australian CGT purposes on the day you become an Australian tax resident, provided you are not also a temporary resident at the time. If the liquidation was completed and the company and the shares ceased to exist in February, you won't have owned the shares for CGT purposes for 12 months.


Further some parts of the distribution from the company may be deemed dividends and assessable as income.

Check out Winding up a company for further general info.


The valuation of the shares should be provided by someone with experience in valuing a business in your company’s particular circumstances, which would mean a suitable valuer in the UK.


You should also contact the UK authorities responsible for company liquidations, including HMRC, to ensure the correct procedure is followed and to establish the taxation treatment in the UK.

There could be some interaction between the taxation treatment in the UK and here which may involve the Double Tax Agreement between Australia and the UK.


Once you've made contact with the UK authorities and determined how and when the winding up will proceed, we suggest you apply for private advice to establish the Australian tax consequences.

 

All replies

KylieATO(Community Support)Community Support
19 Dec 2024

Hi @GET,


We've sent this one to our tech team. We'll come back to you shortly.


Due of the Christmas period, we may not receive a response until early Jan.

Most helpful reply

AriATO(Community Support)Community Support
15 Jan 2025

Hi @GET,


Your understanding of the CGT situation isn't quite correct.


Firstly, you're deemed to acquire the shares in the company for Australian CGT purposes on the day you become an Australian tax resident, provided you are not also a temporary resident at the time. If the liquidation was completed and the company and the shares ceased to exist in February, you won't have owned the shares for CGT purposes for 12 months.


Further some parts of the distribution from the company may be deemed dividends and assessable as income.

Check out Winding up a company for further general info.


The valuation of the shares should be provided by someone with experience in valuing a business in your company’s particular circumstances, which would mean a suitable valuer in the UK.


You should also contact the UK authorities responsible for company liquidations, including HMRC, to ensure the correct procedure is followed and to establish the taxation treatment in the UK.

There could be some interaction between the taxation treatment in the UK and here which may involve the Double Tax Agreement between Australia and the UK.


Once you've made contact with the UK authorities and determined how and when the winding up will proceed, we suggest you apply for private advice to establish the Australian tax consequences.

 

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Calculating Capital Gains Tax (CGT) on Liquidated company overseas | ATO Community