I have around £14,000 left in my business after all debtors and creditors have been paid. Normally, I would have distributed this final profit as a dividend, but I have now become a director and employee of another company in a similar industry and so have decided to close down my sole owner limited company. Can I use entrepreneurs’ relief to reduce my tax bill when I wind up the company?

Arthur Weller replies:
Yes, you can claim entrepreneur's relief on a winding up of a company if the relief conditions are satisfied - see www.gov.uk/hmrc-internal-manuals/capital-gainsmanual/cg64115. Since the assets are less than £25,000, HMRC’s extra-statutory concession C16 can be relevant for an informal winding up. There are anti-avoidance rules that treat distributions on a winding up like dividends in certain circumstances, so it is important that the winding up is not being done with a main purpose of avoiding or reducing income tax.