Time limit on making directors termination payment

MOS99

I have a close company with net cash assets which is being wound down. It was a husband/wife 50/50 company. The husband died April 15. From what I understand a tax free termination payment could be made to the estate of the deceased. Does anybody know if there is a time limit on making this payment. A set of accounts have been filed since his death which didnt include any accrual for this type of payment. The wife needed the cash for working capital for the 1st year, now things have settled down she wants to close the company and extract cash. Any advice greatly appreciated.

ThumbTaxed

MOS99 wrote: »

I have a close company with net cash assets which is being wound down. It was a husband/wife 50/50 company. The husband died April 15. From what I understand a tax free termination payment could be made to the estate of the deceased. Does anybody know if there is a time limit on making this payment. A set of accounts have been filed since his death which didnt include any accrual for this type of payment. The wife needed the cash for working capital for the 1st year, now things have settled down she wants to close the company and extract cash. Any advice greatly appreciated.

In my opinion they have missed the boat....In fact the boat is a mile out of port and you are waving it goodbye

thegolfer

I think you are referring to S.123(5) tca 1997.

In the case of the death of any person who if he or she had not died would have been chargeable to tax in respect of any such payment, the tax which would have been so chargeable shall be assessed and charged on his or her executors or administrators, and shall be a debt due from and payable out of his or her estate.

Revenue Guidance

An assessment may be made on a taxpayer’s executors or administrators where the payment was made in the taxpayer’s lifetime but he/she has died before an assessment was made on him/her.

Reading this it looks like the payment must have been made while the husband was alive, however passed before he had a chance to have an assessment raised.

Looks like time has passed..

Lockedout2

Section 123 is the charging provision.

The OP is referring to the exemption in Section 201 (2) which exempts payments on death of an office holder from the charge to tax under section 123.

The charge to tax arises on the payment as does the exemption. So I'd be looking at it saying that the payment is provided for on 2016 and paid in 2017.

How much are you talking about? Get advice from a CTA.

Be careful closing companies, extracting value and starting new ones!

Mr. Incognito

This is nuanced structured tax advice- consult a professional not an internet forum