Hi Everyone,
I wonder if anyone has any precedent on this.

I have heard of people closing a business in the uk and realising the capital gain outside of the uk, say on a holiday (which according to my uk accountant is perfectly legal), and then returning to Australia (where I was born). That way that person does not have to pay cgt in Australia. My uk accountant says that the cgt may need to be paid in Australia. And Australia's rates are higher than the uk, given the uk's entrepreneurs relief.

Arguments against this method I have heard are that Australia and uk have a tax treaty so any tax not paid in the uk will need to be paid to Australia at Australian rates.
And even though you are not in Australia when the gain is realised, they might still deem you a tax resident based on intention to return (hard to prove).

Does anyone know of anyone who has done this. I only want to do this if it's legal.

Thanks!

Whilst it's perfectly legal to realise a gain whilst you are outside the UK, it doesn't mean you avoid UK tax on it! That said, it is possible in some circumstances. Firstly, you would need to have stopped being UK tax resident by leaving more or less permanently. Now whilst you can do that part way through a tax year for income tax purposes (it's called split year treatment), that doesn't apply to capital gains tax. So if you left the UK for Australia on say 7 April, you would continue to be deemed UK resident for CGT purposes and thus taxed on worldwide capital gains until 5 April the following year. So you would probably want to arrange leaving the UK fairly shortly before 5 April, whilst not realising the gain until after 5 April. Also bear in mind that if it doesn't work out in Australia and you return within 5 tax years, the capital gain would taxable at that point.

As far as Australia is concerned, as I understand it, they tax you on any gains made after you assume tax residence. And by gains made, I mean any increase in value of the asset after assuming residence. If you have already arranged the sale of the asset before you become resident, it's hard to see why you would have any gain at all. Although on the safe side, it might be better to sell the business after (5 April after) you left the UK but before you arrive in Australia. Which is exactly what I plan to do...... one day.

The UK's capital distribution on winding up strategy via Extra Statutory Concession C16 is presently under attack due to planned changes to the tax law.

I believe (please check) there is a cap being introduced from 01/03/2012 of £25k on the distribution if capital treatment is to be agreed via an informal winding up/striking off of the company.

Above that ceiling a formal liquidation (involving liquidator costs) will be required if capital treatment is to be agreed by HM Revenue.

If payments exceed that amount then all the payments are subject to income tax, with the attaching prospect of paying tax under the income tax regime (in the UK or in Australia, depending on where you are tax resident at the time of the divi).

Explore the coming CGT and ESC C16 changes more fully with your accountant.

Best regards.

I should caveat my comments then as I didn't really focus on the OPs reference to closing down his business, rather than selling it. I know very little about the consequences of winding up, I was referring to the possibilities if you sell a business.