Tax efficient closure of ltd company

[eidole]

Hello,

I have a very small limited company and I also have a full time PAYE job. I now want to close the limited company but I'm not sure how to do it in the most tax efficient way. There is a small amount of stock worth approximately 2000 euro and around 38000 euro in the bank. No debts. I have never taken any income from the company. My accountant has given me two options -

1. Get a liquidator which will cost minimum 3000 euro and pay capital gains tax of 33%. This will easily cost over 15,000 euro as far as I can see, which is a lot of money.
2. Take a termination payment. I don't know much about this option and he said he can't guarantee revenue wouldn't query it in the future. He said he consulted with a tax advisor and was told it would be probably ok. I don't want to do anything that could get me in trouble with revenue.

So my question is, are these my only options and is option 2 a legitimate one that anyone else has done or should I steer clear and go with the liquidator? Or are there any other ways to close the company while paying the least amount of tax possible? As far as I know I can't pay it into a pension if I wasn't taking an income all along?

 

[dublin67]

Termination payments are fine and are used all the time. You can probably work out yourself and this Revenue webpage may help https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/lump-sum-payments/index.aspx . If you spouse was also a director a termination payment may be possible there also.
You mention that you can't put it into a pension as you haven't taken any income from the company. But what you can do is pay yourself a salary out of the company, which is taxed under normal PAYE principles, and then make a pension contribution (called a retirement annuity contribution). You can get a tax refund on your pension contribution - just make sure that you do and get relief at 40% in the year that you make the pension contribution.

My view is that the liquidation route is too expensive in terms of tax - you have already paid 12.5% tax on the profits and then you are going to pay an extra 33% in CGT. €3K liquidation fee is standard enough.

Between the termination payment(s) and pension contribution you might get a low enough rate of tax. You can have the company struck off (costs a few hundred Euro) as opposed to liqudation.

 

[eidole]

Thanks so much for your reply. It's good to hear that termination payments are still an option so as I was worried they were risky. My spouse is not a director but another family member is. I presume they can take a termination payment also?

That's also interesting information about the pension. I'll bring it up with my accountant. I need to get the tax bill down as much as possible and if I could go for the strike off option it would save a lot of money and hassle.

Thanks again. I appreciate your help!