The Finance Act 2016: What does it mean for your business?
Brexit and the introduction of complex new rules courtesy of the Finance Act 2016 have given UK businesses much to contend with in recent weeks.
Fortunately, Brexit’s tax implications can be “parked” for a few months as Teresa May has made it clear that she has no plans to invoke Article 50 until early next year. The PM’s decision means that there are unlikely to be any immediate changes, tax wise, for British businesses as a direct consequence of us leaving the European Union.
This is just as well given that UK companies must first of all get to grips with hard hitting new anti-avoidance measures contained in the Finance Bill as well as a raft of other changes, such as the revision of rules pertaining to Patent Box.
Transactions in Securities – be afraid!
As highlighted in our recent newsflash, anti-avoidance rules in force from April 1 2016 mean that the proceeds of a liquidation might be charged to income tax at up to 38.1%, instead of to capital gains tax at only 10%.
Given this situation, we strongly recommend that all insolvency practitioners ask HMRC for a clearance before distributing any of the assets of a company in liquidation.
To learn more about how TIS might affect you, please click here.
Targeted Anti Avoidance Rule – be very afraid!
If TIS wasn’t scary enough, the Finance Act 2016 has also brought us TAAR, the Targeted Anti Avoidance Rule.
TAAR has been introduced by the Government to stop ‘phoenixing’ – the practice where shareholders receive capital distributions on the winding up a company, then run a similar business in some other form. Examples of this would include starting to carry on the same business after winding up your previous one or if you continued to trade through another company.
To learn more about TAAR and its implications, please click here.
Stamp duty – just when you thought it was safe…
And, in another move that many people haven’t spotted yet, a new rule came into being on June 29 2016 which makes stamp duty chargeable in many situations where you put a holding company on top of an existing company in a share exchange transaction.
For reasons explained here, this is another rule we’d like HMRC to rethink as it has the potential of catching unintended targets and imposing a double tax charge. To learn more, please click here.
Patent Box – the opposite of simplification!
If the changes already highlighted weren’t confusing enough, then let’s turn to the innovator’s tax relief, Patent Box, which has just become a whole lot more complicated.
Originally Introduced in April 2013, Patent Box was lauded as a welcome boost to UK technology and innovation – effectively offering Britain’s entrepreneurs a 10 per cent cut in corporation tax on the income they received from their patents. However, for a number of reasons, calculating the relief has become much less straightforward as our more in-depth article explains: For more information please click here.
Entrepreneurs’ relief – What a relief!
Although many of the changes implemented by the Finance Act 2016 are indeed onerous and, in our view, are in some instances too broad brush, we’re relieved to report that it’s not all bad news.
We are delighted to be able to tell you that some of the worst excesses of last year’s Finance Act have been rolled back. You will recall from last year’s newsletters that HMRC made a number of changes to Entrepreneurs’ relief in the Finance Act 2015, which, although intended to combat avoidance, were so poorly targeted that many commercial structures were affected.
Thanks to the tax community and HMRC coming together to thrash out these concerns, revisions have since been made which not only remove the changes but backdate them to the time when they were originally introduced. For further information on what this timely intervention means for Entrepreneurs’ Relief, please click here.
Changes resulting from the Finance Act 2016 are a lot to take in but don’t struggle with their complexities on your own.
We have the in-depth knowledge, expertise and experience e to help you make more sense of the new rules, so if you have any concerns at all, please contact Pete Miller on 0116 208 1020