You may recall our recent blog entry – “Proposed changes to entrepreneur’s relief” – well the 6th April 2016 has now come and gone so how has everything changed?
The changes made as a result of the Finance Act introduced a targeted anti-avoidance rule (TAAR) characterising a liquidation distribution as income in certain circumstances: individual taxpayers will need to determine whether or not they fall within the new TAAR.
Here is an example of where the TAAR may apply:
A close company (one controlled by five or fewer persons) is placed into Members’ Voluntary Liquidation. This is to take advantage of the reduced tax rates. One of the shareholders of the company that was placed into MVL continues to be involved in the same or similar business within the two years subsequent to the liquidation.
Under the above circumstances there is a possibility that the individual may be subject to higher rates of tax having potentially fallen foul of the TAAR. This new legislation has been included in the Finance Act 2016 and applies to distributions made on or after the 6th April 2016 (regardless of the liquidation date).
The above changes gave rise to an increase in the number of MVL appointments taken pre 6th April 2016 to enable distributions to be made before the new tax year.
We were able to give sound advice to those companies who needed to act quickly and to those who would not be affected by the TAAR and therefore had a little more time to undertake the process (those individuals who were looking to retire or had no intention of being involved in the same or a similar business within the two year lock out period.
Here at Bailey Ahmad Business Recovery (BABR) we experienced a significant increase in the number of clients seeking to understand the legislation changes and how this may affect them which in turn led to an uplift in the number of MVL appointments.
Between 1 January 2016 and 1 March 2016 BABR were appointed liquidators over 41 companies and has so far distributed c£9.1m in cash (amongst other assets in specie) to approximately 60 shareholders.
Far from it… we continue to see clients requesting advice on the most efficient way to close down their businesses and continue to assist individuals who do not fall foul of the TAAR.
We at Bailey Ahmad Business Recovery specialise in supporting directors, shareholders and their advisors in implementing low cost MVL solutions.
If you have a client that needs advice or would like further information, please contact us at firstname.lastname@example.org or give us a call on 0208 662 6070.