MVL and TAAR

[jamesbrown]

Am I correct to interpret this as there being two separate "risks"?

So for example say I:

1) received an initial distribution of £90k on January 2020,
2) then a final distribution of £10k on January 2021,and then
3) restarted a similar company/trade on February 2022, and then 4) HMRC investigate and say BADR isn't applicable given then "same trade" rule has been broken

In this case, does the first distribution remain eligible for BADR and that bill remains settled/closed? The second distribution which I initially paid the 10% rate on though would be reclassified and I'd owe the additional 10%?

Yes, in theory. It is based on the capital distribution. I'm not aware of anything in the legislation that would bring the first distribution into scope. Incidentally, you claim BADR on your SATR (or two separate SATR in this case), but that is not the focus of the TAAR, it is the capital distribution in the first place (and, then, of course, you would have the full distribution that fails the test reclassified as a dividend, so you would lose BADR too). Oh, and no, you would not owe an additional 10%, the first distribution would be reclassified as a dividend (assuming you failed the test, which is a little bit more complex than merely being within two years, it is more about motivation), so a lot more than that.