The official "Autumn Statement 2015" AKA "End of Contracting" thread

[MrMarkyMark]

"Autumn Statement: Entrepreneurs off the hook over CGT relief"

For now...

This Govt gives zero confidence it won't be changed (rates/thresholds) in next budget or (perhaps more likely now) in 2017 or 18. What's the point in having a supposed "pro-business" Govt which in effect encourages to sell or even shut down business ASAP???

They could change it by April 2016 Finance Bill, if they complete the consultation by EOY.

[NickFitz]

What's the point in having a supposed "pro-business" Govt which in effect encourages to sell or even shut down business ASAP???

The businesses they are pro are all located within one square mile of London, or abroad. As Frank Zappa said: "They just look after number one, and number one ain't you; you ain't even number two." And Mr Zappa again: "You suckers ain't getting nothing."

[AtW]

They could change it by April 2016 Finance Bill, if they complete the consultation by EOY.

They will have "consultation" about limiting current one to genuine transactions - if they had plan to change threshold and/or rate then they would most likely say now. I think that would still happen in 2017/18 anyway - they are running out of people with some money to fook them over.

[GJABS]

The thing about ER is that it has allowed people to build up a huge cash mountain in their small business, close the business and take that cash into their personal cash mountain very efficiently.

I don't see it as especially efficient. You pay 10% tax on ER returns. But this is on top of the 20% corporation tax you've already paid on it. 30% is not especially low tax, although it is a bit lower than some.

[MrMarkyMark]

I don't see it as especially efficient. You pay 10% tax on ER returns. But this is on top of the 20% corporation tax you've already paid on it. 30% is not especially low tax, although it is a bit lower than some.

I would suggest it makes quite a bit of difference if you have 100's of thousands in there.
Try doing the maths

[TheCyclingProgrammer]

The text clearly indicates that ER will be effectively nuked for PSC.

No it doesn't. It reads more like a tightening up/clarification of the existing rules (Transactions In Securities) plus a general anti-abuse provision aimed at those who shut down primarily to gain a tax advantage (commonly, but erroneously referred to on here as "phoenixing"). Its not a given at all that ER will be denied for those who genuinely cease trading and have cash reserves in the company on liquidation (and why would it, the whole point of ER is to provide tax relief to people who dispose of all or part of their business).

But lets wait and see before jumping to conclusions.

[TheCyclingProgrammer]

30% is not especially low tax, although it is a bit lower than some.

28% overall.

Which is significantly better than if you'd paid CT plus the highest rate of CGT (42.4%) or CT plus higher rate dividends (40% now, more from next year).

[MrO666]

Let's be honest, any ER changes are not aimed at the likes of you and I that might have a 2-300k sitting in company accounts. These rule changes will be for the people "abusing" the rules like what has been mentioned in the past and the press. Management buyouts and all that type of stuff.

Yes we may end up caught in the net, but I don't think anyone at the treasury or HMRC have sat there and thought yep, lets screw over those couple of hundred contractors a year that shut their firms down.....evil bastards

I've been a contractor for 20 years and I can honestly say I only know one person who's ever actually used ER relief in this way......and I'm talking about "psc" contractors, not other types of business interest.

The 3.8 billion a year that HMRC think they're loosing out on is most definitely not coming from IT contractors.

[AtW]

I don't see it as especially efficient. You pay 10% tax on ER returns. But this is on top of the 20% corporation tax you've already paid on it. 30% is not especially low tax, although it is a bit lower than some.

It's 28%.

Total: 100
Corp tax: 20%
Left: 80
ER: 10%
Left: 72

Total tax: 28%

Once Corp tax drops to 18% overall tax burden will be 26.2%

There are also various Corp tax reliefs that can reduce actual amount paid.

... and in Northern Ireland - only 21.25% overall with their shiny new corp tax of 12.5%!

It's much better than any other option with increase div tax and other things, so that's why it will be removed from all but big companies that FOR NOW won't be fooked over by pro-business Tory Scum.

[AtW]

No it doesn't. It reads more like a tightening up/clarification of the existing rules (Transactions In Securities) plus a general anti-abuse provision aimed at those who shut down primarily to gain a tax advantage

Nobody can stop people from shutting down business, they can get bored of it, achieve their objectives etc. But they can disallow ER in such cases and leave it only for genuine sales of shares in event of acquisition by unrelated party.