Entrepreneurs Relief Going?

Discussion in 'Accounts & Finance' started by UK Contractor Accountant, Feb 13, 2020.

  1. UK Contractor Accountant

    UK Contractor Accountant UKBF Big Shot Full Member - Verified Business

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    The rumor mill around No 10 & the Treasury is that ER is going to be tinkered with or go all together in the forthcoming Budget in March 2020 or later date if postponed following the Chancellor's resignation today.

    So if you have plans to sell up this year are you considering bringing this forward to take advantage of the existing ER rules to take advantage of the 10% tax rate on exit?
     
    Posted: Feb 13, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #1
  2. SteLacca

    SteLacca UKBF Ace Free Member

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    Not a lot of time, now, particularly if clearance is being sought from HMRC. If it goes, it could go with immediate effect in the budget.
     
    Posted: Feb 14, 2020 By: SteLacca Member since: Jun 16, 2016
    #2
  3. UK Contractor Accountant

    UK Contractor Accountant UKBF Big Shot Full Member - Verified Business

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    manufacture a sale to bank ER?
     
    Posted: Feb 14, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #3
  4. SteLacca

    SteLacca UKBF Ace Free Member

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    The problem with manufacturing is if HMRC look too closely it could be caught by TiS rules and have an even bigger tax cost than a capital gain would.
     
    Posted: Feb 14, 2020 By: SteLacca Member since: Jun 16, 2016
    #4
  5. UK Contractor Accountant

    UK Contractor Accountant UKBF Big Shot Full Member - Verified Business

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  6. SteLacca

    SteLacca UKBF Ace Free Member

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    That could work, but as I say, would probably not stand up to scrutiny in view of TAAR/GAAR.
     
    Posted: Feb 14, 2020 By: SteLacca Member since: Jun 16, 2016
    #6
  7. Clinton

    Clinton UKBF Big Shot Free Member

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    I suggested this in LinkedIn several days ago. There's still time :)

    But, as @SteLacca points out, there is simply not enough time now to go for a normal sale. It takes many months from starting the process to completing on a transaction.

    I warned (again in LinkedIn) way back in Oct /Nov last year that anyone considering a 2020 sale should start the process ASAP to try and beat the March budget. I observed back then that both Tory and Labour manifestos had designs on ER so no matter who won the election the writing was on the wall.
     
    Posted: Feb 14, 2020 By: Clinton Member since: Jan 17, 2010
    #7
  8. Adam93

    Adam93 UKBF Regular Free Member

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    It is exactly this type of transaction that is caught by the 'Transactions in Securities' anti-avoidance legislation meaning any capital receipts will be taxed at the dividend rates of income tax.

    There are ways to bank ER but it certainly doesn't involve using a holding company to 'manufacture' a sale.
     
    Posted: Feb 15, 2020 By: Adam93 Member since: Jan 18, 2018
    #8
  9. Clinton

    Clinton UKBF Big Shot Free Member

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    Pray, tell ;)
     
    Posted: Feb 15, 2020 By: Clinton Member since: Jan 17, 2010
    #9
  10. UK Contractor Accountant

    UK Contractor Accountant UKBF Big Shot Full Member - Verified Business

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    If a busines sale is in progress or contemplated this year then the new structure interim disposal is exactly how I would do it. Not sure how @Adam93 proposes to do it!

    Exchange unconditional contracts on an interim disposal to a structure (holding company) set up for the purpose before the 5 April 20.This is then followed by a second sale to a third party purchaser prior to 31 Jan 21

    Doing so will ‘lock-in’ to the current Entrepreneurs Relief regime because of the CGT time of disposal rules.

    Ideally, the conditional second sale to a third-party purchaser would then take place before 31 January 2021 (which is the date by which CGT on the interim disposal would be payable, assuming that sale completes).

    TIS don't apply as there has been a major change in the ownership of the business on the eventual sale.
     
    Posted: Feb 15, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #10
  11. Adam93

    Adam93 UKBF Regular Free Member

    330 62
    What happens if you don’t want to sell the company come 31st January?

    If ER is removed from 6th April, the quickest way to create a dry tax charge will be to transfer shares to a settlor interested trust.
     
    Posted: Feb 15, 2020 By: Adam93 Member since: Jan 18, 2018
    #11
  12. UK Contractor Accountant

    UK Contractor Accountant UKBF Big Shot Full Member - Verified Business

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    if you don't sell by Jan you have to stump up the CGT out of own funds -,simples

    You have a long stop date on the interim sale. if you breach that condition the whole thing falls through and you are back to square one.

    Why mess about with Trusts if you have the intention to sell this year but are hampered by the 5 April 20 deadine date.
     
    Posted: Feb 15, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #12