Quantuma are partners with K&B Accountancy Group and offer a leading restructuring and insolvency practice, delivering partner led solutions to businesses and individuals facing financial distress. Please read their latest article below for information on the latest HMRC tax reforms.

As you may already know, HMRC intend to fundamentally reform the manner in which dividends and other company distributions are taxed for individuals, in pursuit of those members of the business community who have sought to structure their financial affairs in order to pay less tax.

Interestingly, HMRC see this as a behavioral problem. And to eliminate the targeted tax leakage, the amendments seek to address matters by way of introducing two measures that reduce the incentive to convert income into capital and so increase the tax take.

These measures will potentially affect the following:

  • Transactions concerning the sale of shares.
  • Repayment of share capital.
  • A company purchasing its own shares.
  • Distributions in a winding up.

The area that we are involved with regularly is that of making distributions in a (solvent) winding up.

The proposed targeted anti-avoidance rule would treat a distribution after 6 April 2016 from a liquidation as an income distribution where:

  • An individual receives a distribution from the winding up of a close company in respect of shares held.
  • Within 2 years the individual continues to be involved in a similar trade or activity.
  • A main purpose of these (entire) arrangements is to gain a tax advantage.

In view of the above, many accountants and advisors are now considering the implications of these changes with their clients that may prompt directors to accelerate any previous intention they may have had to complete a solvent winding up process in the future.

If you require any assistance, please do not hesitate to give K&B Accountancy Group a call on 020 7078 0211 and we will help point you in the right direction. We can also be contacted here.

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