Further to our recent news story on the proposed enactment of ESCs, it is important to note that included among those is ESC C16. This ESC concerns the availability of CGT rather than Income Tax treatment for shareholders in certain situations where a company is being dissolved. However, the draft legislation to enact this particular ESC would limit the amount that can be paid out subject to capital gains tax treatment to a maximum of £4,000.

As the concession currently stands, capital gains tax treatment may be available as opposed to income tax.

HMRC has now published draft statutory provisions in their December con-doc to enact 8 further ESCs (including C16). As it currently stands, the proposed legislation to enact C16 sets out a condition that any payment at the time of the dissolution exceeding £4,000 will be liable to income tax.

Comments on the con-doc are invited by 7 March 2011.