# Tax on capital distribution from UK company whilst living in France



## Shieldsy (Nov 12, 2020)

My situation is that I was a freelance software developer in the UK but am now salaried in France and am closing my UK service company.
I want to remove the remaining funds from the company bank account in the most tax efficient way so I'm interested to hear from anybody in a similar position who has already done this.
I believe I have the choice of a dividend or a capital distribution of the remaining funds but I'm not clear about how I would declare either of them to UK and French authorities. I'm tax resident in France.
Thanks in advance for any relevant and detailed advice.


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## Bevdeforges (Nov 16, 2007)

If you're closing down your UK business, you need to net out your balance sheet (i.e. offset all remaining assets, including your bank balance against any remaining debts - pay off your bills, your loans, any outstanding taxes or amounts due to you as "salary" or for expenses related to the business, etc.). What's left is the net worth of your business - your capital. It depends a bit on how your business was structured, but generally speaking the capital belongs to you (as owner or shareholder) and as long as all the taxes have been paid off along the way, I don't believe it is going to be subject to taxes other than any outstanding fees for dismantling your business.


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## Shieldsy (Nov 12, 2020)

Thanks for the reply.
Everything is paid off and this is the remainder I need to take out. My accountant is quoting from HMRC when he says 'a UK shareholder will receive a capital distribution taxed at no more than 20%. (This can be 10% if a trading company has only recently ceased) '. I don't know if a capital distribution is taxed as 'income' in France or how I would declare it using the double taxation rules. 
I could also take it as a dividend but that is classified as 'income' in France and taxed at the full rate.


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## Bevdeforges (Nov 16, 2007)

Don't take it as a dividend - taxation of dividends in France can be pretty brutal. But if you settle the UK taxes on the distribution, for French tax purposes it can probably be considered a simple transfer of capital (like from your UK bank account to your French bank account). Again, it may be a matter of what type of business entity you're using here, but the business entity is a UK person and probably should be liquidated under UK law. (It may also depend on what kind of sums you're dealing with.)


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## 255 (Sep 8, 2018)

Shieldsy -- What Bev said, but maybe an example to help clarify: Let's say you put in 30,000.00 to start your company and received/issued yourself 3,000 shares (10.00 per share.) Your basis in your company is now 30,000.00. If you have 30,000.00 left in your company, that you return to yourself and relinquish your 3,000 shares to close the company -- it's a wash (your initial investment was 30,000.00 and your finale distribution/return of capital, by selling your shares back, would be 30,000.00, so zero gain or loss. Similarly, if the shares in your company were now valued at $15.00 (45,000.00/3,000 shares,) you would have a capital gain of 15,000.00. (This is probably what your accountant was referencing.) Alternately, if you've taken gains from your company, along the way, and your stock is now only worth 15,000.00, you would have a capital loss of 15,000.00, so clearly no taxes owed, and perhaps an offset to other gains/income. Cheers, 255


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## Shieldsy (Nov 12, 2020)

Thanks for the replies, folks.


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