Disincorporation relief provides shelter, but only from corporation tax, for goodwill and land and buildings leaving a company. The assets must leave as part of the transfer of a whole business as a going concern via a distribution to non-corporate shareholders. It is important to note that there are potential income tax or capital gains tax charges on the shareholders on the distribution of the business, which needs to be managed. When Might Disincorporation Relief be of Use? - If the shareholders wish to separate trades to plan for a potential sale of one. One business could be left in the company and one distributed out - To assist in the facilitation of a demerger of two or more businesses to allocate them in whole to shareholders ...

Overview & Background to the ATED The annual tax on enveloped dwellings (ATED) was introduced in the Finance Act 2013 and is a new tax applying from 1 April 2013. High value UK residential properties that are owned by 'non-natural' entities (see below) could be subject to the ATED, which was introduced with a view to curbing the avoidance of stamp duty land tax (SDLT) through the practice of selling shares in a company owning a UK property, rather than the property itself. The non-natural entity will have to pay the annual tax where the value of the residential property was over £2m as at 1 April 2012, or if the property was purchased for more than £2m after this date. The tax payable is based on a banded rate depending o...

The self-assessment system means that it is the taxpayers obligation to register for tax returns with HM Revenue and Customs - but who needs to submit a tax return? Who Needs to Submit a Tax Return The tax rules state that all persons chargeable to income tax or capital gains tax that have not been issued a notice to submit a tax return by HMRC must notify their liability to tax unless certain exceptions apply (broadly speaking that all income is subject to PAYE or they are only subject to income tax at the basic rate). However it is perhaps easier to consider the occasions where a person may be required to notify HMRC and submit a tax return: - You dispose of assets resulting in a liability to capital gains tax (note - the disposal of ...

The General Anti Abuse Rule (GAAR) was introduced in the Finance Act 2013 and takes effect from 17 July 2013. A key issue for any advisors providing tax planning advice is now whether the strategy suggested is "abusive". If it is and HMRC are effective in implementing the GAAR the tax result of the transactions will be deemed to be what would have happened should a reasonable course of action been taken. All other tax rules will continue to apply.  In effect the GAAR will be HMRC's "back stop", if they consider the tax planning to be too good to be true and no other rules can charge the planning to tax in the way that HMRC would consider to be appropriate; given the intention of the legislation in question. HMRC's website provid...

In the recent case of Prest v Petrodel Resources Ltd the Supreme Court was asked to decide whether The Family Division of the High Court had authority to order companies to dispose of assets to an individual as part of a divorce order. Companies, solely owned by the husband in the divorce case, appealed against the Family Division's order for them to transfer properties worth £17.5m to the wife in the divorce case. In the Supreme Court Lord Sumption said that there were only three ways in which the properties could be made available in relation to the divorce order - The corporate veil could be lifted/pierced;  it was thought this could only happen if evasion was evident - If a power in the Matrimonial Causes Act could be enacted...

Background - what is BPR? Business Property Relief (BPR) is a valuable tax relief which can reduce the taxable value of business assets for inheritance tax purposes, potentially to nil. BPR is available in respect of transfers on death/in lifetime as well as inheritance tax charges during the lifetime of a trust (such as the 10 year charge or exit charge for trusts within the relevant property trust regime such as discretionary trusts). However, BPR is not available in respect of business assets where the business consists "wholly or mainly of one or more of the following, that is to say, dealing in securities, stocks or shares, land or buildings or making or holding investments" In practice this means that there is often uncertainty ...

The recent case of Russell Baker v HMRC TC02790 highlights the difficulties that arise where a company purchase of own shares does not meet the statutory requirements. It also highlights the importance of considering general legal principles in conjunction with the relevant tax rules. Case Summary The directors of the company fell out in 2005 in consequence of which the company undertook a company purchase of own shares in January 2006 to buy back the shares of one of the directors.  In return the director received total consideration of £120,000. HMRC raised an enquiry into the taxpayers 2005/06 tax return and concluded that the consideration of £120,000 was a distribution subject to income tax because the distribution did not m...

Overview Businesses that commenced after 22 June 2010 based in 'qualifying regional areas' may be eligible for an Employers National Insurance Holiday for up to 12 months. The qualifying regional areas include Yorkshire and Humber, North West, North East, West Midlands, East Midlands, South West, Scotland, Northern Ireland and Wales. The Employers National Insurance Holiday is available to relieve employers NI contributions on the salaries of the first 10 employees starting in the first year of business, but finishing on 5 September 2013 if this is earlier. Refunds for Backdated Claims Many new businesses are unaware that the Employers National Insurance Holiday could apply and so have not yet made a claim. However for such businesses...

Overview of Entrepreneur's Relief Entrepreneur's relief is available on the disposal of qualifying business assets and shares and allows the taxpayer to claim a reduced rate of capital gains tax of just 10% (compared to 18/28% for basic/higher rate taxpayers). Since 6 April 2011 entrepreneur's relief has been available on up to £10 million of gains - this is a lifetime limit which applies per person. The relief is therefore very valuable and is often utilised by business owners. In order for the relief to be available a number of conditions must be met - the relevant conditions will depend on the type of asset being disposed of and who is disposing of the assets. Entrepreneur's relief can also apply to certain trusts such as the tr...

A US Limited Liability Company (LLC) is treated as a partnership for United States tax purposes.  That is, a US person who is a member of the LLC has a direct interest in the LLC’s assets and activities. However, the tax treatment of an LLC for UK tax purposes has been debated. The ongoing test case is George Anson v HMRC (also known as Swift Case), which was found in favour of HMRC in the Court of Appeal in February 2013.  It was found in favour of HMRC in that it was held that US LLC’s are opaque for UK tax purposes,  in essence akin to a company for UK tax purposes.  The reason for this decision was primarily because the LLC could make its own decisions, independent of its members. We have advised a client in the past m...