Reply to: Budget Budget

[MrC]

So yes, these are the critical points and no one yet knows what the answer will be. But you can guarantee one thing: HMRC will make all attempts to get their desperate, illogical hands on CGT for the entire distribution. So they will lobby HMT to remove ER for liquidations regardless of what stage they are in, and for the entire distribution.

Just to be clear you are suggesting that in Heathmounts scenerio above, HMRC would , given their way, not allow ER against the March 20 distribtion even if it were before the law changed?

If you are then there's a case for trying to get a 100% distribution in this tax year and this is likely to be a much bigger win for most (getting ER on 100%) rather that getting no ER whatsoever but having 2 years CGT.

Is anyone else thinking its a safer bet to get 100% this tax year with the ER and write off the £1200?

[ChimpMaster]

OK, so following scenario:

MVL process started and 75% distributed in March 2020
Budget announcement that entrepreneurs relief to be cancelled from April 6th but still allowed for MVL's in progress.
Remaining 25% distributed in July 2020

Are we saying that 75% is applicable for ER and 25% is not?

Obviously I'll be finding everything out next week from MVL but wondered what people's opinons were on here.

heathmount

So yes, these are the critical points and no one yet knows what the answer will be. But you can guarantee one thing: HMRC will make all attempts to get their desperate, illogical hands on CGT for the entire distribution. So they will lobby HMT to remove ER for liquidations regardless of what stage they are in, and for the entire distribution.

We just have to hope that government sees fit to make a logical law, perhaps not even remove ER.

[ahspooner]

I guess it depends on when/if ER is disposed. If it's April 6th then I'm assuming initial distribution will have ER, the second just having capital gains tax applied.

OK, so following scenario:

MVL process started and 75% distributed in March 2020
Budget announcement that entrepreneurs relief to be cancelled from April 6th but still allowed for MVL's in progress.
Remaining 25% distributed in July 2020

Are we saying that 75% is applicable for ER and 25% is not?

Obviously I'll be finding everything out next week from MVL but wondered what people's opinons were on here.

heathmount

[Heathmount]

OK, so following scenario:

MVL process started and 75% distributed in March 2020
Budget announcement that entrepreneurs relief to be cancelled from April 6th but still allowed for MVL's in progress.
Remaining 25% distributed in July 2020

Are we saying that 75% is applicable for ER and 25% is not?

Obviously I'll be finding everything out next week from MVL but wondered what people's opinons were on here.

heathmount

[MrButton]

Nah, you're taxed according to when you receive the distribution, so you could indeed split it across two tax years and get relief in each (assuming whomever does your MVL is willing to factor it like that).

Based on posts I’ve seen from Maslin (I think) this is how I understand it too.

[jamesbrown]

Hi. I've just spoken to MVL today, just waiting for my last invoice to come in before officially kicking things off. From the quote above you seem to think that you could get 2 lots of 12k tax free capital gains, I assume based on getting 75% of the distribution within a few weeks (this tax year) and then the other 25% within 4-6 months (next tax year)? Is this right? From what I heard today there's a single point in time at which you are deemed to have liquidated the company and so the entire distribution would fall within a single tax year regardless of when you actually receive the money?

Heathmout

Nah, you're taxed according to when you receive the distribution, so you could indeed split it across two tax years and get relief in each (assuming whomever does your MVL is willing to factor it like that).

[Heathmount]

From what I understand it’s still worth trying to get in with the initial distribution within the current tax year. So you get this years 12k tax free allowance. And next years.

Hi. I've just spoken to MVL today, just waiting for my last invoice to come in before officially kicking things off. From the quote above you seem to think that you could get 2 lots of 12k tax free capital gains, I assume based on getting 75% of the distribution within a few weeks (this tax year) and then the other 25% within 4-6 months (next tax year)? Is this right? From what I heard today there's a single point in time at which you are deemed to have liquidated the company and so the entire distribution would fall within a single tax year regardless of when you actually receive the money?

Heathmout

[ahspooner]

That's my plan. Accountancy has started proceedings, then im going to take a call when they're done whether to pass it to the liquidator. If the accountants promises of turnaround time aren't met, then the process is reversable at that point. I just wanted to build in plenty of time for the liquidator. I'd rather reverse the process than 1st distribution going into the next tax year without knowing the state of the budget.

I'm probably overly worrying, but would rather remain in control (relatively at least)

From what I understand it’s still worth trying to get in with the initial distribution within the current tax year. So you get this years 12k tax free allowance. And next years.

[MrButton]

This is one of the reasons i've been indecisive about MVL.

I was going to start the process on Monday, but wanted assurances that the initial distribution would be pre 20/21 tax year (April 6th), therefore a known quantity. The last situation I wanted to be in, was to start the process, hit a blocker then a change come into the budget which I couldnt then course correct.

I think it's unlikely they'll change it with effect from Aprl 6th, as people could have been going through the MVL process for months before the new tax year, and it wouldn't be fair. But then again, when has life been fair.

From what I understand it’s still worth trying to get in with the initial distribution within the current tax year. So you get this years 12k tax free allowance. And next years.

[MrC]

This is one of the reasons i've been indecisive about MVL.

I was going to start the process on Monday, but wanted assurances that the initial distribution would be pre 20/21 tax year (April 6th), therefore a known quantity. The last situation I wanted to be in, was to start the process, hit a blocker then a change come into the budget which I couldnt then course correct.

I think it's unlikely they'll change it with effect from Aprl 6th, as people could have been going through the MVL process for months before the new tax year, and it wouldn't be fair. But then again, when has life been fair.

I get your point, it's very much a one way street.

How did you fare in getting any assurances?

You'd like to think that any change would be reasonably phased in eg any companies currently in liquidation would be exempt from changes.

Worst case you hit 20% rather than 10% - its still less costly than HR divis though obviously a lot more tax than a pension or slow extraction.

And you are not wrong - life isn't fair - felt like telling one of the permies at clientco that this week when they were whinging about contractor pay!

[ahspooner]

This is one of the reasons i've been indecisive about MVL.

I was going to start the process on Monday, but wanted assurances that the initial distribution would be pre 20/21 tax year (April 6th), therefore a known quantity. The last situation I wanted to be in, was to start the process, hit a blocker then a change come into the budget which I couldnt then course correct.

I think it's unlikely they'll change it with effect from Aprl 6th, as people could have been going through the MVL process for months before the new tax year, and it wouldn't be fair. But then again, when has life been fair.

[jamesbrown]

Regards the review. What makes you think that it will be annouced prior to carrying it out?

It's all guesswork, I suppose, but the review was a manifesto commitment, so I would expect a full announcement and period of review, followed by conclusions. I don't think they'll delay between conclusions and implementation though; they will share the results on a budget day, together with the legislative changes to apply from that day, at least if history is any guide.

Technically, they can do anything they want, but I'm pretty confident they won't do anything in the March 11 budget w/r to legislative change. It's worth what you paid for it though

[MrC]

Budget is March 11. That is a spring budget. You could also view it as a delayed-autumn-budget, since Autumn Budget 2019 didn't happen. But they aren't going to have two budgets this spring. Autumn Budget 2020 will presumably happen. They are still on the new (cf. Hammond) autumn budget timetable for the main budgets, AFAIK.

ER will likely be flagged w/ a review on March 11 and then implemented in Autumn Budget 2020, around November 2020, and the measures will probably apply from that date, not April 2021.

Thanks for clarifying. Makes a bit more sense now.

Regards the review. What makes you think that it will be annouced prior to carrying it out?

Could the review have been going on quietly in the background since the Tories got re-elected?

Having seen gov and HMRC being pretty brutal with changes to Landlords it doesnt seem impossible to me that they could bring a change in come March 11 with immeadiate effect. Would you really want to give business 6 months + notice and loose all that lovely CG tax if you were the exchequer?

Of course its all somewhat dependant on whether they actually want to tinker /scrap ER or if that was just supposed to be be a vote winner in their manifesto (while not a populist move it might allow them to claim they'd budgeted for the give aways)

[ChimpMaster]

Budget is March 11. That is a spring budget. You could also view it as a delayed-autumn-budget, since Autumn Budget 2019 didn't happen. But they aren't going to have two budgets this spring. Autumn Budget 2020 will presumably happen. They are still on the new (cf. Hammond) autumn budget timetable for the main budgets, AFAIK.

ER will likely be flagged w/ a review on March 11 and then implemented in Autumn Budget 2020, around November 2020, and the measures will probably apply from that date, not April 2021.

I am thinking the same thing.

I have been investigating into when the ER changes could actually apply, and the details I'm getting from accountants is that the distributions (from liquidation) must be made before the ER changes are effected.

The actual submission for ER relief will then be made on your personal SATR, in Jan 2022.

For example, if you begin the liquidation in August 2020 and funds are distributed in October, before ER is scrapped in November - then you can still make a claim for ER in January 2022 on your SATR.

It gets (more) complicated if a partial distribution is made before the ER changes come in. But then again, it's not like HMRC/HMT to ever make things straightforward.

This is of course all conjecture so far.

[AtW]

New taxes incoming - higher divintax, higher CGT, destroyed ER

Still beats the alertnative