CG57828 | Capital distributions: valuation when distribution made in winding up

Shareholders will often receive more than one capital distribution during the winding up of a company. Each distribution, other than the final one, is treated as a part disposal of shares so the residual value of the shares after each distribution is needed to attribute a proportion of the cost of the shares to the distribution (unless the distribution is “small”).

Where the shares of a company are unquoted at the date of the distribution and the liquidation is expected to be completed within two years of the distribution, HMRC will accept any reasonable valuation of the residual value of the shares at the date of the distribution. Where all the distributions are made before the shareholder makes their self-assessment, HMRC will accept that the residual value of shares following any particular distribution is equal to the actual amount of the subsequent distributions

This approach was originally set out in Statement of Practice D3.