Having reviewed what seemed like a fairly “tax light” autumn statement, hidden away in the detail are some worrying remarks which may lead to the removal of a very appealing exit strategy for many small business owners, providing a tax rate on par with Andorra.
Before Mr Osborne’s speech, lots of rumours were flying around regarding entrepreneurs relief. Would the relief be restricted or even abolished; the limit was coming down to £5m; the rate was going up to 15%; the relief will be denied for property businesses or on liquidation, yada yadda.
None of these things actually happened. Indeed, the only announcements were of minor technical changes, but what about this:
To reduce opportunities for income to be converted to capital to gain a tax advantage, the government will shortly publish a consultation on the company distributions rules, and will amend the transactions in securities rules and introduce a targeted anti-avoidance rule.
Given that that the transactions in securities rules are themselves an anti-avoidance provision, why is there a need for more legislation here?
Is this in fact a hint of possible restrictions to entrepreneurs relief in the offing? Might HMRC be looking at a mechanism that makes it easier to say that in some circumstances “perhaps liquidations“ what is received is accumulated income rather than capital and hence the relief is not available?
This relief has been under attack for a while now, having been fettered from the peripheries, I think it would be unwise to assume everything is now rosy in the entrepreneurs relief garden.
If you have accumulated reserves in your company and would like to discuss how entrepreneurs relief can secure a 10% tax rate on release of these funds, contact us today. We have Accountants in Canary Wharf and Brentwood waiting to take your call.