HM Revenue & Customs has issued a consultation document on anti-avoidance measures to prohibit previously conventional routes for extracting cash from owner managed businesses as capital. The proposals will likely have far reaching implications on distributions from companies, particularly via solvent liquidations ("MVLs").
Government's main areas of concern are:
consultation goes on to say that to address these issues the Government will
look to introduce new Targeted Anti-Avoidance Rules so distributions via an MVL
would be treated as income for tax purposes in situations where:
It is not
just MVLs that are in their sights, other procedures include third party sales
of retained profits which may otherwise have been paid out in dividend form had
the company not been sold and repayments of share capital, including a company
purchase of its own shares. Little detail is provided about the other two
areas, the consultation concentrates on MVLs.
consultation runs until 3 February 2016 and the new draft legislation is
expected to be part of Finance Act 2016 and come into force on 6 April
If you have
a client who would like to get the benefits from an MVL before there are any
changes action will need to be taken by 5 April 2016. It may be more
prudent to act by 16 March 2016 (the date of the 2016 Budget) if possible.
Additional details about MVLs can be found on our website by downloading the solvent liquidations briefing sheet or alternatively you can download the full consultation document. If you require specific advice please contact Gary Rupping firstname.lastname@example.org or Gerard Smith email@example.com on call us now on 0800 331 7417.