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...

A roundup of the latest news from the world of tax including highlights from the Finance Act 2013 as well as recent tax cases of interest. Click on the links below to view the full articles. Lifting the Corporate Veil http://wp.me/p3gayI-4a The recent case of Prest v Petrodel Resources Ltd looks at the powers of divorce courts to pierce the corporate veil. Sale of Home but is it a Residence http://wp.me/p3gayI-40 The recent Moore case acts as a reminder that occupation by itself is not sufficient to make a house a 'residence' for capital gains tax purposes. Company Purchase of Own Shares - Transactions Void http://wp.me/p3gayI-3M The recent case of Russell Baker highlights the difficulties that arise where a company purchase of...

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 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...