Reply to: Will entrepreneurs relief be the next thing to go?

[alphadog]

My ltd company has about 250k sitting in cash which I'd planned to pay out slowly as dividends over the years.

Osborne shafting contractors in the budget has ruined that plan.

Should I get out now while entrepreneur's relief is still in existence and pay 10% on the cash balance.

Yes. Do it ASAP.

Alternatively, move overseas 'permanently' for more than 5 years to a country that doesn't tax offshore dividends, and take the lot as a tax free dividend.

[Maslins]

Appointing a liquidator is a formal step posted in the London Gazette, so if such a change were made - it would likely apply to any "future" liquidations - where the liquidator has not yet been formally appointed to take over the company.

I would hope so. Would seem very unfair if someone made a decision and followed a course of action based upon tax law, and mid way through that process the rules change, with no ability for the person to change their mind. Once a liquidation is started it can't be reversed.

[tractor]

....

Appointing a liquidator is a formal step posted in the London Gazette, so if such a change were made - it would likely apply to any "future" liquidations - where the liquidator has not yet been formally appointed to take over the company.

Be sure they and their friends would get enough warning to finish the process before any changes are implemented.

[centurian]

Tricky one.

Just me speculating, but I imagine if they did decide to make any significant changes to entrepreneurs relief, it likely would be a "from midnight tonight" change...albeit probably with some scope to allow it for disposals where there was already an unconditional obligation committed to. This seems to be what they've done with the intangible changes in the Summer budget of a couple of weeks ago.

Appointing a liquidator is a formal step posted in the London Gazette, so if such a change were made - it would likely apply to any "future" liquidations - where the liquidator has not yet been formally appointed to take over the company.

[tractor]

...

As long as there is corporation tax that won't happen. They may not care about us, but they sure do care about big business, and if all the employers who can pack up and move to Singapore or something, they'll have a lot less money to play with.

The goal of the dividend tax is to try to make up for the NI they think they are losing. It may go up in coming years, but it won't go to income tax levels.

They can increase it for PSCs if they get enough traction on the term for it to be acceptable as a categorisation. Welcome to FLC. It's time it went to court.

That way they distinguish us from bigco and 'regular' close companies and can stiff us for as much as they want.

[WordIsBond]

Dividends tax would go up for sure, most likely it will be aligned with income tax bands.

As long as there is corporation tax that won't happen. They may not care about us, but they sure do care about big business, and if all the employers who can pack up and move to Singapore or something, they'll have a lot less money to play with.

The goal of the dividend tax is to try to make up for the NI they think they are losing. It may go up in coming years, but it won't go to income tax levels.

[AtW]

ER was already big in use, enough to have attracted their attention, but this year it will be huge - it's only question of when now they "reform" ER - in pre-budget in Autumn, or in the new budget in 2016.

[JoJoGabor]

Again, just an uneducated guess, but my bet is on that ER will also be scrapped. The govt are clearly targeting people who "dodge" tax by using limited companies, and I have no doubt the use of ER will rise significantly this year, putting it even more in the radar (I'm sure its being looked at already).

If I had large amounts of money in my ltd, I would be planning to close it and use ER before the end of this year.

In fact from my back of the packet calculations, this may end my contracting altogether - from next year, with the dividend tax, I'm better off accepting a permie offer I was given last week.

[AtW]

But if you are close to retirement, that could definitely change the picture. You could draw down a lot of dividends every year in retirement at less than 10% tax.

Dividends tax would go up for sure, most likely it will be aligned with income tax bands.

[AtW]

I can't see how ER would get any better so everybody now will be shutting down companies to take out money with ER, so yes, I am sure Gideon would nuke ER next, or make it such that it's impossible to use. If I remember correctly they were already looking into it in the last pre-budget (2014), could be wrong but I think ONS found that a lot more people were using it, so "loss" of tax was higher than predicted, I actually expected them to make changes in the last budget in March 2015, but I guess at the time they actually cared for votes of the business people, not any more they don't.

P.S. This is not a legal or financial advice.

[jamesbrown]

Tricky one.

Just me speculating, but I imagine if they did decide to make any significant changes to entrepreneurs relief, it likely would be a "from midnight tonight" change...albeit probably with some scope to allow it for disposals where there was already an unconditional obligation committed to. This seems to be what they've done with the intangible changes in the Summer budget of a couple of weeks ago.

I don't know to what extent the government see the likes of MVL Online as a tax avoidance "scheme"...but the dividend tax changes in isolation make an MVL even more appealing. Does therefore make me think it probably will be for the chop (or at least made less appealing) some time soon. Exactly when, who knows.

Totally agree. It will likely be addressed, and I'd be very surprised if they lagged it. Any changes that introduce significant scope for tax planning (as with the stamp duty changes) are likely to be introduced immediately.

[WordIsBond]

I'd speculate it is for the chop, or at least headed for serious restrictions for one man bands, and that there will be limited advance notice. If I had that kind of reserve, I'd seriously consider getting out. If you go umbrella, you aren't running the same business, are you? You've become an employee.

But if you are close to retirement, that could definitely change the picture. You could draw down a lot of dividends every year in retirement at less than 10% tax.

[Maslins]

Wouldn't it require a statutory change to remove it from legislation?

The scrapping of ESC C16 was announced in the December / January time and then in place from March, IIRC.

I'm no lawyer...but presumably they could change the rate quite easily if they decided to do so, potentially making it far less appealing.

[Dallas]

Jimmy Carr is doing it - maybe he knows something.

[TheFaQQer]

Just me speculating, but I imagine if they did decide to make any significant changes to entrepreneurs relief, it likely would be a "from midnight tonight" change...albeit probably with some scope to allow it for disposals where there was already an unconditional obligation committed to. This seems to be what they've done with the intangible changes in the Summer budget of a couple of weeks ago.

Wouldn't it require a statutory change to remove it from legislation?

The scrapping of ESC C16 was announced in the December / January time and then in place from March, IIRC.