In our previous article Protect & Thrive - Asset Protection & Holding Companies (30 March 2020) we looked at the benefits of inserting a 100% parent company above a trading subsidiary. But what happens when a group decides to simplify and rationalise its structure instead? This article focuses on situations where there are a number of holding companies above one or more trading companies and looks at the reasons why a group may choose to streamline its structure and the different options available. Benefits of a Simpler Structure A group structure may have arisen as a result of one or more management buy-outs and/or capital reduction demergers, rather than a direct conscious choice by the directors. Each company is required ...

Entrepreneur’s relief  ("ER") is a valuable relief from Capital Gains Tax ("CGT") which, when available, restricts the tax rate to a flat 10% on up to £10 million worth of lifetime gains. The 2018 Budget announced changes to the conditions for obtaining ER, and in light of the new rules it may be worthwhile for taxpayers to dispose of relevant assets before 6 April 2019. Minimum Qualifying Period ER applies to disposals of: shares in a trading company; (the whole or part of) a business; assets in association with the sale of a business; assets from a solvent company that has ceased trading. For disposals involving shares, the shareholder would need to work for the company and hold at least 5% of the ordinary s...

Here are some of the highlights from the Chancellor of the Exchequer's 2018 Budget (published on 29 October 2018): Personal Tax The Personal Allowance will be raised to £12,500 and the Higher Rate Threshold (i.e. the amount that an individual can earn before paying higher rate tax) to £50,000 in April 2019 – a year earlier than planned. These levels will remain the same in 2020/21, and then increase by CPI going forward. The final exemption period for Principal Private Residence Relief (PPR) which provides Capital Gains Tax relief on the sale of your home will be reduced from 18 to 9 months. Under the current PPR rules, where you have let a property which at one point was your home Lettings Relief may be available to reduc...

In a departure from recent cases regarding holiday lets, the First-Tier Tribunal (FTT) has ruled that a holiday let in the Isles of Scilly is eligible for business property relief (BPR) for inheritance tax (IHT). Those looking to claim BPR on their own holiday lets may find this case instructive but should bear in mind that HMRC are likely to challenge claims until clearer precedents are set by higher tribunals or courts. Background Grace Graham and her husband purchased a dilapidated farmhouse within an acre of land in St Mary’s on the Isles of Scilly in 1972. The farmhouse was renovated and extended before being used as B&B and then country house hotel up to 2003. From 2003, the business changed in response to incre...

Entrepreneurs’ Relief (ER) is a valuable capital gains tax (CGT) relief that allows qualifying gains to be taxed at a fixed rate of 10% rather than at the normal rates of up to 20% on the disposal of business assets. One key condition for the availability of ER on the disposal of shares is that the seller must have owned at least 5% of the company’s “ordinary share capital” in the 12 months prior to disposal. In the case of HMRC v McQuillan [2017], the Upper Tribunal examined the definition of “ordinary share capital” as defined in the legislation and held that a right to no dividend is not a right to a dividend at a fixed rate of 0%, thereby denying ER. Background Mr and Mrs McQuillan each owned 33% of the shares ...

Click here to download Issue 8, 2017 of the Intelligent Tax Newsletter. In this issue:  The "Big Tax Case" - Final Score: HMRC 1, Rangers 0 Are Directors Required to File Tax Returns? Impact of Cash Surpluses on Entrepreneurs' Relief Changes to Salary Sacrifice

Entrepreneurs' Relief (ER) is a valuable relief that enables business owners to pay capital gains tax at 10% (as opposed to up to 20%) on all gains on qualifying assets. A key condition for the availability of ER is that the seller must be an officer or employee of the business throughout the 12 month period up to the date of disposal. The date of disposal for capital gains tax purposes is when beneficial ownership is transferred from the seller to the purchaser. Therefore, where the disposal is made by way of contract, the disposal date is when there is a binding and unconditional contract to sell the asset. The recent case of John Kenneth Moore v HMRC illustrates the importance of structuring transactions correctly so as no...

Click here to download Issue 5, 2016 of the Intelligent Tax Newsletter. This issue provides a summary of the new 'Persons with Significant Control' reporting obligations, ways to facilitate a management buyout, and Making Tax Digital.

Pension contributions can be a tax efficient way of accruing wealth for the future.  However, consideration should be made as to the potential tax consequences that could arise as part of pension planning. Benefits on Retirement Most schemes will allow an individual to take 25% of their pension pot tax-free upon retirement, subject to the lifetime allowance (£1m for 2016/17).  Therefore, a taxpayer could receive up to £250,000 (25% of £1m) of their pension pot tax-free upon retirement, with the remaining funds being liable to income tax.  Taxpayers should discuss the most effective options for drawing these funds with a qualified independent specialist. The government’s Pensions Advisory Service (TPAS) is available to taxpay...

The preference for the receipt of loan notes in their QCB or Non QCB format has swung to-&-fro since the introduction of the Qualifying Corporate Bond concept in 1984. As the tax arena stands today, the differential is marginal, with the key factors being: Any true gains realised on a QCB being free from capital gains tax If the loan notes become irrecoverable then CGT will still be paid in full on gains that are rolled into QCBs.  "Bad debt relief" is available for non-QCBs. Attaining the Taxpayer's Preference QCB or Non QCBs are effectively loan notes which are often exchanged for shares in a company to facilitate a deal where some of the cash will be paid at a later date.  Tax on inherent gains within shares...