A surprise announcement on 9 December 2015 by HMRC as part of a consultation document on owner managed businesses, has provoked a tax storm. Major changes are now planned to the taxation of owner managed businesses from as early as April 2016.
Below are just a few of the changes that will impact owner managed businesses from 6 April 2016:
New and more rigorous conditions may apply to shareholders who wish to have their shares purchased by their own company and taxed at the beneficial 10% CGT rate.
The accumulation and extraction of surplus cash funds/profits at the beneficial rate of 10% CGT (Capital Gains Tax) by owner managers/shareholders will become increasingly more difficult.
Business owners could find that any funds extracted will be taxed at the new dividend tax rate of 38.1%.
Impact on Special Purpose Company Vehicles (SPVs)
The above changes will be felt heavily in some industry sectors, especially in those that may traditionally operate via SPVs.
SPVs may no longer have access to the 10% CGT rates in respect of their own liquidation. Any profits extracted from these companies could potentially be taxed at the new 38.1% dividend tax rate.
All is not lost….
It is really important to note that these changes will not take effect until 6 April 2016. You may still have time to ensure that any planned and relevant transactions are completed before these new rules come into force.
If you would like to speak to one of our team to discuss how we might be able to help you before the 6 April 2016 deadline, please contact us on 020 7330 0000.