Well known face on Leicester business scene has set target of at least £3,000 – and needs your help
Tracey has set £3,000 target
A well known face on the city business scene is cutting out alcohol for three months in aid of a very good cause.
Tracey Miller, a partner at her husband Pete’s Leicester tax specialist firm The Miller Partnership is raising money for Leicester charity Hope Against Cancer, which funds potentially life-saving research.
She has set a target of at least £3,000 and is already at £1,365 on her Just Giving page.
Tracey has helped various charities over the years, such as fashion and fizz evenings raising £5,000 for the Loughborough Rainbows children’s hospice, through to helping the Lord’s Taverners raise thousands for disadvantaged children at Leicester business fundraising events.
She is also on the business board of Soft Touch Arts in Leicester, and has arranged money-raising events for it.
Tracey Miller was named Culture Vulture at the 2016 Alternative Business Awards – a comedy fundraiser in Leicester. Pictured with compere Patrick Monahan and Curve chief executive Chris Stafford
She now wants members of the city’s business community to back her three months of stopping drinking.
She said: “Cancer is such an indiscriminate blight on our loved ones – it took both my dad and my grandfather in their prime.
“Yet here in the heart of Leicester, only a mile or so from where I live, is this incredible charity, funding groundbreaking research and clinical trials to combat it.
To sponsor Tracey click here.
“At a Hope Through Business lunch at Leicester Racecourse in April, I learned that £80,000 raised by Hope had led to a discovery about the increased effectiveness of radiotherapy in certain cancers administered depending upon whether the patient was a ‘morning’ or an ‘afternoon’ person.
“This astonishingly simple premise could change the way that radiotherapy is implemented for those cancers not just locally or nationally, but worldwide.
Tracey Miller is off the booze for three months
“I am absolutely determined to do this and indebted to two of my favourite city centre cocktail purveyors who will be fashioning fabulous non-alcoholic drinks which I know, as well as HOPE, will see me through my dry spell.”
She already has businesses sponsoring different periods of the challenge – chartered surveyors Edward Cooper Young; construction company Smallman & Son; Harborough’s Corporate Architecture and Glynis Wright & Co Family Solicitors and Mediators.
And she said the Parcel Yard bar next to Leicester Railway Station will even be hosting an “It’s Raining Fizz Party” from 5pm on November 30 to celebrate the end of her challenge.
The Miller Partnership were delighted to be sponsoring the “Culture Vulture” award at the ceremony. Congratulations to the winner, Alister de Ternant. You can see the video of the award below:
UPDATE – we’re really looking forward to supporting this fabulous event next week.
Read more here: LM-countdown-to-alternative-business-awards.pdf
The light-hearted spin on the traditional business awards will take place as part of the 2018 Leicester Comedy Festival.
The event is supported by many local businesses, including The Miller Partnership and will raise money for the Big Difference Company, Hope Against Cancer and Lord’s Taverners.
See more here: LM-great-response-to-our-light-hearted-awards.pdf
Thompson Reuters Practical Law asked leading tax practitioners for their views on the Autumn 2017 Budget.
Pete Miller’s contribution:
“There doesn’t seem to have been much action on the corporate tax side in this Budget, which given the massive changes over the last few years is something of a relief. If anything, the picture from a corporate perspective is of tinkering around the edges and fixing things, rather than making any major changes. For example, the complicated regime for hybrids brought in by Finance Act 2016 and the even more complex regime for restricting the interest deductions for companies, which only gained Royal Assent a week ago, are both being technically amended in order to make sure that they work properly. This is not a suggestion of incompetence on the part of the original drafters, but rather a reflection of the complexity both of the U.K.’s tax code and of the commercial world in which it operates, in that however hard all the stakeholders work, the fact is that complicated regimes like this will impact commercial transactions in a way that was not intended in some cases. It is, therefore, only common sense that those bits of the regimes that don’t work should be fixed as soon as possible.
Probably the most noticeable amendment was the removal of indexation allowance from companies. Indexation allowance was originally introduced at a time of relatively high inflation, to allow you to index link the price of assets between the date of purchase and the date of sale, so that capital gains tax or corporation tax on chargeable gains would, in effect, only tax the genuine increase in value of an asset, not simply the inflationary increase. The indexation allowance for individuals and others who do not pay corporation tax was repealed in 2008, from 31st March that year, so that, for all future gains, no indexation allowance could be given. It is interesting that in removing the indexation allowance from companies, they will still be able to claim the accumulated indexation up to 31 December 2017, but no further indexation will be given from 1 January 2018. This is in marked contrast to the treatment of individuals in 2008, where the immediate abolition of the relief effectively doubled or trebled the latent gains in certain cases!
The other point of particular interest is that, hidden away in the Red Book is a promise to consult on the regime for intangible fixed assets. The regime for companies owning intangible assets is that, in many cases, the cost of an asset can be amortised or impaired for tax purposes. There are also a series of reliefs and exemptions from taxation which largely mirror the rules applicable to tangible assets within the capital gains regime for companies. One of the areas that has been a problem for some years, however, is that some of the new reliefs from corporation tax on gains, such as the amended degrouping charge and the substantial shareholding exemption, are not mirrored in the intangible assets regime. This means that the reliefs, which were intended to apply across the board, only apply to companies with older trades, and not with new trading companies with substantial goodwill. We have made many representations to HMRC on this point, and we can only hope that the proposed consultation will address some of these concerns, albeit many years later than we would have hoped.”
Artists donated works to raise much-needed funds for the Leicester charity Soft Touch Arts.
More than 70 guests and artists attended the first Soft Touch Arts fundraising art auction, held at Abbotts Oak Manor hotel near Markfield on September 29.
Read the full article in the Leicester Mercury.
Nelsons Solicitors recently held its quarterly business drinks reception and light buffet networking event at Revolution Bar just up from their offices on New Walk in Leicester. Pete was in the area and attended along with around 40 other guests including staff members, contacts and clients of the firm who travelled from across Leicestershire. Commenting on the event Pete said, “It was a really good event and a great opportunity to catch up with friends new and old informally over a beer and some nibbles. I’m looking forward to their next event which, I believe, will be held in November.”
More photos from the event can be found here:
The Miller Partnership sponsored and provided a judge for the Leicester University Festival of Postgraduate Research held on 29 June 2017.
During the Festival the University showcased its best research student talent and this year the standard of entries was very high. Expert judges were extremely impressed by the breadth and quality of work on display and the knowledge and passion for research demonstrated by our presenters.
The Miller Partnership were proud to sponsor the Leicestershire Law Society Awards, Chambers of the Year category which was won by KCH Garden Square.
For more details on the win by KCH Garden Square please see the article: https://www.themillerpartnership.com/wp-content/uploads/Leicester-Mercury-23-May-2017-Chambers-of-the-Year-KCH-Garden-Square.pdf
TAAR: Why you should stop worrying about the new anti-phoenixing measures
When the details of the Finance Act 2016 were first published, new measures such as changes to the Targeted Anti Avoidance Rule (TAAR), were met with a fair degree of interest by company owners.
However, as the months have gone by and these changes have started to bed in, what was initially just a talking point has become a cause for concern for many of the businesses I talk to.
The TAAR was introduced by the Government to prevent what is known as “phoenixing” – the process whereby shareholders receive capital distributions on the winding up of company then go on to run a similar business in another form, such as carrying on the same business as a sole trader after winding up the company, or continuing the same trade through another company.
If you are caught by the TAAR then you could see your capital distributions being taxed as dividends at an income tax rate of up to 38.1 per cent – and not as capital gains tax which may attract entrepreneurs’ relief at the much more favourable rate of 10 per cent. The rules make quite a difference.
The crux of the matter lies in whether or not you are trying to avoid paying income tax by phoenixing the company, which is something only you, or the clients you are advising, can decide.
Many people I have spoken with worry that the anti-phoenixing rules will catch them. In many cases, the TAAR is not a problem; clients just need reassurance that they are 100 per cent commercial. But there are cases where we need to look more closely at the rules and their application to the particular situation.
Crucially, businesses should note that the TAAR can only apply if you are liquidating and not selling your business. We may be able to help you with opportunities to sell the company as a money-box, instead, so if this might be helpful, please call or email us at once.
Although the anti-phoenixing rules are still fairly new, The Miller Partnership has many years’ experience in advising on such motive-based tests in taxation law. The chances are, the rules won’t apply to you, but if you think that they might, please talk to us. We can help.
Even in wholly commercial cases, HMRC might decide to enquire into the situation, because they think that the TAAR might apply. Those cases will also need careful handling, to ensure that we are able to convince them of the commerciality of the winding up. The evidence will be a major factor in HMRC’s decision, so call us if you are thinking of winding up your company, and we’ll help you make sure that you have all the proof you will need.
The changes to the transactions in securities rules mean that, apart from considering the TAAR, if you are planning to wind up or liquidate your business, you must get tax clearances from HMRC first. It’s vital you do so and I cannot stress this course of action strongly enough.
The Miller Partnership were proud to sponsor the Leicestershire Law Society Awards, Chambers of the Year category. The two finalists were 36 Bedford Row, now known as the 36 Group, and KCH Garden Square.
The Food Glorious Food Jukebox Jokeslam at Soft Touch Arts sponsored by Miller Partnership and Jukebox was truly an evening of Foodie fabulousness.
Guests enjoyed great food and drink, a fabulous buffet, whilst anticipating the comical entertainment for the night, which included a spot from Pete.
The event raised the stunning amount of £2,800 – full details on the Soft Touch Arts blog.
Thompson Reuters Practical Law asked leading tax practitioners for their views on the Spring 2017 Budget.
Pete Miller pointed out the contrariness in the Chancellor’s approach:
“The real difference is that the self-employed people and small business owners bear the commercial risks of their businesses failing, risks that simply do not apply to employees; they put their own money into starting businesses, employing workers and driving the economy forward.”
Budget 2017 comment from corporate tax expert Pete Miller of The Miller Partnership, based in Leicester.
“Probably the biggest issue in the Budget is the increase in class 4 National Insurance contributions for self-employed people to 10 per cent from April 2018 and 11 per cent from April 2019.
Additionally, director shareholders are also penalised by the reduction of the tax-free dividend allowance from £5,000 to £2,000 a year from April 2018.
This means that most self-employed and owner-managed companies will be worse off.
The Government talks a lot about supporting working families but its actions belie its words, with big tax hikes for self-employed people and small business owners.
The Chancellor’s rationale was that differences in National Insurance were justified by differences in pension and benefit entitlement for employees.
But the real difference is that self-employed people and small business owners bear the commercial risks of their businesses failing; risks that simply do not apply to employees.
Business owners and the self-employed put their own money into starting businesses, employing workers and driving the economy forward, and increasing their tax burdens will reduce the attractiveness of business ownership.”
Tolley’s Tax Digest – Transactions in Securities, issue 173 March 2017 is now available.
This publication by Pete Miller contains detailed, expert guidance:
- fully updated for the FA 2016 changes;
- relevant case law, including Cleary, Greenberg, Joiner and Wiggins;
- impact on reductions of capital;
- effect of winding up close companies;
- new fundamental change of ownership test;
- changes to the motive tests;
- extended definition of income tax advantage;
- and much more.
Pete Miller of The Miller Partnership looks forward to another eventful 12 months for the business tax world
There is no doubt that 2016 was an eventful 12 months for the UK’s corporate tax sector, with 2017 set to bring its own set of challenges for businesses and individual taxpayers.
In the year that brought us Brexit – not to mention new incumbents at Number 10 and Number 11 – we also witnessed the implementation of a number of far-reaching tax changes in the Finance Act 2016.
Although some of these rule changes could be accurately described as onerous, and in some instances a little too ‘one size fits all’, there have been some welcome developments.
One notable positive development for the tax sector – and, indeed, for common sense – has been HMRC’s s decision to roll back some of the worst excesses of the Finance Act 2015.
You may recall that HMRC made a number of amendments to Entrepreneurs’ relief in the 2015 Act, which, although intended to combat avoidance, were so poorly aimed that many commercial structures were unfairly affected.
Fortunately, tax professionals, myself included, sat down with HMRC to thrash out our concerns, resulting in amendments so that the rules were properly and accurately targeted – replacing the original blunderbuss approach with a sniper’s rifle – and also backdating the changes to the time when they were originally introduced.
This clearly demonstrates what can be achieved when the tax industry and HMRC come together in a spirt of co-operation and I’m proud to have played my part in achieving such a satisfactory outcome.
Looking forward to the year ahead, one key change emerging from the Finance Act 2017 concerns the way in which ‘enablers’, such as tax advisers and accountants, are treated from a taxation perspective. Until now tax avoidance penalties have only ever been targeted at tax-payers themselves – not the professionals who advise people on their tax affairs, so this is quite a significant step. Once again, we are pleased to see that HMRC’s original and draconian proposals have been better targeted. Under the new, revised proposals, enablers who assist their clients in gaining tax advantages that HMRC believes were never intended by Parliament, could be fined up to 100 per cent of their fees. The new rules only apply to tax-saving arrangements that would be subject to the general anti-abuse rule. This is in contrast to HMRC’s original suggestion that these penalties might apply to tax advice on normal commercial transactions, such as the transactions in securities rules – an area in which we specialise.
In a related development, taxpayers will find it harder to avoid penalties if they have failed to take proper care when submitting their tax returns. Until now businesses have only had to prove to HMRC that they sought general professional tax advice, but that is about to change. Under the new rules business owners must be able to demonstrate that they took “appropriate” advice which is pertinent to their own business’s needs and circumstances. So relying on generic advice, taken, for example from a scheme promoter, will no longer be adequate to prove that the taxpayer was not careless if the scheme fails and that they have therefore submitted an incorrect tax return.
Other measures which come into force courtesy of the Finance Act 2017 include the way business losses are treated for tax. These welcome changes mean that companies will be able to use losses more flexibly, with carried forward losses being available to set against all future sources of income and also being available for group relief. At the moment, carried forward losses can usually only be set against the same kind of income in future years and cannot be used for group relief.
Of course 2016 was not only a busy year for the UK tax sector – it was a memorable one for The Miller Partnership too.
It is now five and a half years since our tax consultancy was established in Leicester city centre, and in September we moved to more spacious premises in New Walk House, 108 New Walk; just a few hundred yards from our old office.
During 2016 I also had two technical tax books published – the Taxation of Partnerships published by CCH and Taxation of Company Reorganisations published by Bloomsbury – as well as continuing to lecture extensively on tax issues.
It was also gratifying to receive national recognition from the Chartered Institute of Taxation, (CIOT) the UK’s leading professional tax body.
In October the Institute presented me with the CIOT Award of Certificate of Merit for my contribution to education and conference lecturing. It was a great honour – especially as this recognition came from my fellow tax professionals.
Nearer to home, The Miller Partnership is proud to play its part in Leicestershire’s thriving business community.
We continue to work closely with De Montfort University in offering mentoring to its business and finance students and graduates and in promoting the benefits of mentoring training to others.
Similarly we have forged a lasting relationship with our New Walk neighbours, Soft Touch Arts.
This award-winning local charity uses arts, media and music activities to engage with and change the lives of disadvantaged young people.
We have helped Soft Touch Arts to fund its ongoing mentoring programme as well as assisting financially by paying for table cloths and place mats at its pop-up café. And we are linking together with the Leicester Comedy Festival to present Food, Glorious Food! At Soft Touch Arts, an evening of comedy and food, with amateur and professional comedians, a joke slam and a comedy quiz, and other excitements and surprises, all in aid of Soft Touch, on 21st February.
Although The Miller Partnership operates at a national as well as local level, it is great to be actively involved in the local business scene. We have a busy schedule planned for 2017 and look forward to taking a role in the Leicester Comedy Festival as one of its Platinum Business Partners.
From the Leicester Mercury
Members of the business community are exercising their vocal chords in preparation for a big fund-raising celebration.
Accountants, lawyers and even plumbing merchants are getting ready to join the X Factor-style charity singing event – called the L-Factor – on March 31.
Up to 1,000 people are expected at the big night out which could raise up to £50,000 for charity. Tickets are £20 each.
Organisers have confirmed the event will be held at the Leicester Arena, home of the Riders basketball team, and a short walk from the city centre.
The night will see singing acts – made up of local business people – battle it out on stage in aid of the Lord’s Taverners.
The charity raises money for young people from disadvantaged backgrounds and those with disabilities to help them enjoy sport.
Some of the money will support the Leicester team at the Special Olympics in Sheffield this summer.
County business consultant Ian Guyler, who is chairman of the Lord’s Taverners for the East Midlands, said: “We’ve got £20,000 from our five main sponsors and from a band sponsor, and are hoping for a further £30,000 from ticket sales and contestant sponsorship.
“We have 12 contestants from the business community already signed up and we are looking for between 750 and 1,000 to attend on the night.
“We had 1,000 people the last time we did this in 2014 and tickets are on sale now and are already selling well.”
Main sponsors are Total Motion, Interserve Learning and Apprenticeships, Hastings Direct, Gateley and SME Capital.
The house band on the night – called the Y Fronts Band – is being sponsored by plumbing merchants Pochins.
The backing band is made up of well-known business faces – Gateley senior partner Gareth John, Mattioli Woods consultant John Kelly, Soft Touch Arts business development director Christina Wigmore, BDO audit manager Simon Cotton, and Maytree Group manager director Nigel Upton. This will be the third L-Factor Mr Guyler has arranged which – combined with an It’s a Knockout-style Gauntlet event at Leicester Tigers last summer and a light-hearted debate at Leicester Cathedral – have raised a total of £200,000.
The organisers have even recorded a pop video which sees business leaders singing their version of Dancing in the Street. It can be viewed on the business section of the Leicester Mercury website
Peter Bailey is local business development manager for Total Motion, a UK-wide leasing and fleet management business based in Meridian Business Park.
Mr Bailey, one of the stars of the video, said: “We supported it before and are delighted to be a headline sponsor.”
Leicester Riders chairman and arena director Kevin Routledge said: “We are absolutely delighted to be hosting the L Factor for the first time, and supporting the charitable work of the organizers from the Lords Tavenors.
“It is a great event and provides us with a superb opportunity to showcase the arena.”
To buy tickets, call 0116 326 9700 or visit:
Read more at the Leicester Mercury.
Millions of us have been watching The Great British Bake Off over the last few weeks, alternately laughing and crying with the contestants as they bake fabulous show-stoppers or produce undercooked, soggy-bottomed disasters. But this time there is also a sense of loss as the much-loved BAFTA-winning show moves from the BBC to Channel 4, leaving most of the original cast behind.
Such sad partings are actually very common in the commercial world: people who have gone into business together frequently reach a point where they want to move in different directions, and need to separate their interests. It may be that the business’s owners no longer see eye to eye and have fallen out, or it could be that their opinions differ about what direction their business should take. Alternatively, it may simply be that some areas of the business are more exposed to risk than others, so a spilt will help to address these different risk profiles.
And that’s where tax comes in, because without expert help, a division of a business in this way can lead to unexpected tax bills for both the shareholders and the companies themselves. We call these transactions “demergers”, although “division” is a better description. Demerging a business might sound complicated and daunting, but with the right tax advice, breaking up can be as easy as pie.
More recently, demergers have been made more difficult with some hardening of attitudes within HM Revenue & Customs and also because of recent changes to stamp duty. We have managed to develop mechanisms to ensure that these changes should not impact on commercial transactions, and we continue to engage with HMRC to try and reverse the worst effects of recent legislation.
The Miller Partnership has wide experience of dividing companies and groups into two or more parts, taking advantage of all the relevant tax reliefs and obtaining clearance in advance from HMRC. We can use our expertise to carry out these demergers by any of the known mechanisms – distribution in specie, liquidation or reduction of capital – and we can advise you on which one best meets your commercial needs.
We are currently helping a large UK engineering group restructure ready for a major investment by a European multi-national group. At the other end of the scale, we are working with a family-owned nursing home group to separate the valuable properties from the high-risk care business to protect its assets. Another of our recent successes was in separating a multi-million pound property portfolio between its shareholder families, so that one family could focus on the rental side of the business and the other could move into property development.
In all cases, we design the demerger in the most tax-efficient way, we explain the transactions to HMRC so that they can formally approve the tax treatment before we start, and we work with the client’s lawyers and accountants to make sure the tax outcome is what our clients expect. In every case, our timely intervention has allowed clients to fully exploit their businesses’ full potential.
Whether you are The Great British Bake Off or a family-owned business, please contact The Miller Partnership by phone or by email for more information. We can help you break up your business painlessly and effectively; in fact with our help it should be a piece of cake!
Direct Line: 0116 208 1020
Mobile: 07802 197269
We are very proud to work closely with De Montfort University and in particular with their Employability Mentoring Officer – Andy Morris. Pete has spoken at the University before as well as mentored one of their business students so he was delighted to be included in their recently run Mentor Training. This video was put together after Pete attended the session and the film will be used to communicate the importance of skills development to those mentors who are based further afield and couldn’t make the training. If any businesses are interested in mentoring then we would wholeheartedly recommend talking to DMU and getting involved in helping students prepare for the world of work.
Corporate tax expert Pete Miller has received national recognition from the Chartered Institute of Taxation, (CIOT) the leading professional body for tax in the UK.
The co-owner of tax consultancy The Miller Partnership in New Walk, Leicester, he is to receive the CIOT’s Award of Certificate of Merit for his contribution to education and conference lecturing.
Pete lectures nationally to accountants and lawyers all over the country, and locally as guest lecturer at De Montfort University. He is passionate about education and sits on the Institute’s Education Committee and on a number of technical sub-committees.
Professionally he is also instrumental in helping reshape UK taxation policy though CIOT’s consultations with HM Revenue & Customs.
Most notably Pete was among tax advisers who succeeded in getting changes to Entrepreneurs’ Relief introduced in 2015 revised and backdated so that its anti-avoidance measures were targeted more accurately and fairly.
The Award of Certificate of Merit was introduced by the CIOT’s council in 2010 for both members and non-members who have played a significant role in the workings of the institute.
Pete said: “It was a wonderful surprise to learn that I am to receive this award.
“It’s a great honour – especially as this recognition has come from my fellow tax professionals.
“I am a great supporter of the CIOT and the role the institute plays in educating and informing people about how the UK tax system works.”
Pete will be presented with the award at an evening reception at the Darwin Centre of the Natural History Museum in London on Tuesday October 11.
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
The Finance Act 2016 has resulted in a whole raft of taxation changes for British businesses and their professional advisors.
Pete Miller, tax expert with The Miller Partnership, looks at the wider implications of the Act’s new anti-avoidance measures and explains what the new legislation might mean for your business.
He also takes a more in-depth look at how the new tax rules will affect stamp duty, Patent Box and Entrepreneurs’ Relief.
HMRC has extended the reach of the transactions in securities rules to counter what it regards as an income tax advantage when you take money out of a company in such a way that you pay capital gains tax at 10% or 20%, instead of income tax on dividends, at up to 38.1%.
This change to TIS – and what it means for insolvency practitioners as well as businesses – was highlighted in our recent newsflash.
From April 6 2016, TIS rules potentially apply if you liquidate a company – which you might do if you have sold the business and don’t need the company any more. If these rules do apply to you, it means HMRC can charge income tax as if on a dividend, instead of on capital gains tax.
HMRC keeps telling us that it does not intend to use these rules in a ‘normal’ liquidation, whatever that is. But we cannot rely on these statements, so we strongly recommend that you ask HMRC for a clearance before your company is liquidated. If you are an adviser, it may well be that your professional indemnity insurers would expect you to apply for these clearances as a matter of course.
Tax law says that HMRC must answer these clearance applications within 30 days and we are very experienced at preparing them, so please give us a call.
Of course, this change means that HMRC is going to have to cope with tens of thousands more new applications. This bureaucratic headache for our already over-stretched Revenue is among the concerns the professional tax community shares in respect of changes implemented by the Finance Act 2016.
The Government’s new Targeted Anti Avoidance Rule (TAAR) is designed to prevent ‘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.
If you are caught by TAAR, then you may well find that your capital distributions are taxed as dividends at a tax rate of up to 38.1 per cent, rather than as capital gains which may attract entrepreneurs’ relief at much more palatable 10 per cent.
The crux of the new rule is whether you are trying to avoid income tax by phoenixing the business, which only you or your clients can decide.
Crucially, there is no clearance for these new rules, so under self-assessment you and your clients will have to decide whether the new rules apply. This carries the threat of having to pay extra tax and penalties if you get it wrong.
While this is new legislation, we have many years’ experience dealing with these motive-based tests in the tax legislation, so if you’re worried, please call!
Another new rule came into force 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.
However these regulations relating to stamp duty should only be applicable in certain circumstances.
If the new holding company issues shares of the same class and in the same proportions, as it usually will, there should not be a stamp duty charge.
This is because the new rule is intended only to impose a charge where a takeover is intended and stamp duty is otherwise avoided.
But the way the new rule is worded means that it also catches a number of normal commercial transactions, such as certain demergers and sales where stamp duty is payable in the normal way. These are clearly not the intended targets. As a result, there is now a real possibility of double taxation in completely inoffensive transactions.
We have suggested to HMRC that this new rule needs revisiting, so that it targets only the intended transactions and does not impose a double tax charge. Unfortunately, any changes must wait until Parliament returns from its summer recess in September.
If you are relying on this relief, however, please ring or email to see if we can help.
Another tax regime which has been somewhat revised by Finance Act 2016 is Patent Box, the initiative aimed at rewarding and encouraging innovation among UK businesses.
First introduced in April 2013, Patent Box effectively offers 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.
Some of the changes to Patent Box have been implemented because of objections from other EU member States (actually, just Germany) and also stem from the international anti-avoidance initiative, the Base Erosion and Profit Shifting (BEPS) project.
Hypothetically businesses paying £100,000 of corporation tax, can, through Patent Box, make savings of around £50,000.
However, as part of the Finance Act 2016, the rules have now been modified to incorporate new ‘nexus’ calculations which link research and development spend directly to patents.
Under the old regime, it was irrelevant who undertook the original research resulting in the patents. But, in order to satisfy the revised rules, Patent Box claimants must now prove that they did the work themselves or paid for it to be done by somebody else.
Patent Box relief under the new regime will often need separate calculations of the profits made by each individual patent or product, which will hugely increase the complexity of the calculations.
These tough new regulations have caused UK entrepreneurial companies to re-evaluate their corporate structures – and I’m sure that all the red tape will have put off some smaller businesses from pursuing Patent Box.
It’s not been made any simpler by the 71 amendments to the draft legislation that were passed by Parliament in June! So we are all still trying to make sense of the detail of the new regime.
In the meantime, businesses who lodged their patent application before July 1 2016, or who already hold a patent, have two years (until June 30 2018) to opt into the old, much less complex, regime, so it is worth making the most of Patent Box’s potential tax benefits.
If you or your clients are exploiting patents that they own or license, call us to see if they can claim the patent box relief.
Although many of the changes implemented by the Finance Act 2016 are indeed onerous, it is not all bad news.
Thanks to the collaborative approach taken by the tax community and HMRC – and following lengthy negotiations – some of the worst excesses of last year’s Finance Act have now been rolled back.
Last year 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.
Under those changes made in the Finance Act 2015, entrepreneurs’ relief was not available for a sale of a business by a sole trader or a partnership to a company owned by a relative.
Thankfully this has now been amended, so that you can sell your business to a relative through a company and still claim entrepreneurs’ relief.
Additionally entrepreneurs’ relief was not available where the trade was carried on as a joint venture or a corporate partnership.
This has since been amended so that the shareholders of the parent or partner company can now claim relief, as long as their interest in the underlying trade is at least 5%.
And, under last year’s rules, the relief for associated disposals was often not available when shares or partnership interests were sold to family members – a particular problem within the farming community. This aspect too has been revised to prevent an inadvertent barrier to family successions.
All of the changes relating to this relief have been backdated to the dates that the original changes were effective. This is an excellent example of HMRC and the tax profession working together to understand each other’s positions and coming up with workable solutions to these problems. It’s a pity that the initial changes were not drawn up in this way, which would have saved a lot of time and trouble on all sides, but all’s well that ends well.
Having been closely involved with the new amendments, we are extremely well placed to help you with your entrepreneurs’ relief questions.
For more information and advice on the Finance Act 2016 and how it affects you, please contact Pete Miller on 0116 208 1020
Pete Miller of The Miller Partnership commenting on Government proposals which would see accountants or tax advisers who help clients gain tax advantages that HMRC thinks were not intended by Parliament being fined up to 100% of the tax bill that had been avoided.
Read Pete’s comments here: https://www.themillerpartnership.com/wp-content/uploads/Leicester-Mercury-22.08.16.pdf