COIVD has certainly taken its toll on businesses across the country, with most seeing significant reductions in turnover and with no end in sight, we are seeing a significant number of Directors now making the decision to cease trading.
If you are in the fortunate position to be solvent and have accrued reserves, ceasing to trade may not only be an option, it may be imposed on you with the announcement of recent curbs on trading and personal freedoms.
Winding up your company can be a tax efficient way to release built up wealth and reserves. We work alongside clients providing advice and guidance around the differing options available and can provide help and solutions to those in both a solvent and insolvent position.
The holy grail when winding up a solvent company would be to achieve a capital distribution that qualifies for ‘Business Asset Disposal’ relief, or Entrepreneurs Relief as it was known prior to the Finance Act 2020.
Primarily referred to in its abbreviate form, BAD is a relief that has been around for many years, in one guise or another. Individuals receiving qualifying capital gains have the option of paying a maximum effective tax rate of just 10% on amounts up to £1,000,000.
Although heavily fettered in recent times, this relief remains one of the most sought after on statue and is accessible in several ways.
Historically this relief was a cornerstone of tax planning for small owner managed businesses, and it was this excessive application and deemed abuse that has resulted in the introduction of a more restrictive regime.
With the reduction in the lifetime allowance down from £10,000,000 to £1,000,000, there is also now a far higher qualifying criteria required under a dissolution including an equity holding period of 24 months alongside a host of other carefully drafted requirements and anti avoidance legislation. Competent planning and strategic implementation are essential to ensure successful results.
It is widely anticipated this relief will be one of the first to disappear once Mr Sunak has commenced efforts to recover the COVID billions spent to date.
If you have a limited company with accumulated reserves, it is essential you act now to avoid a doubling, trebling or who knows, a quadrupling of your tax liabilities? If the 70’s saw effective tax rates in excess of 75%, who knows what we will see in the years to come.
If you are impacted by COVID and feel your options are limited, whether that is due to becoming insolvent or simply due to the adverse trading environment. It may be a good time to speak to us and explore what options are available.
An Initial consultation with one of our qualified Chartered Accountants is total FREE. We are available 6 days a week, 8am to 6pm. We have COVID secure offices in London, Manchester, and Essex and can offer socially distanced face to face meetings or should you prefer we can arrange an initial conference call or virtual meeting.