Reply to: CGT Review

[heyya99]

That’s not how they do it......
Budgets make changes for the upcoming tax year.
NOT the current tax year. To do so would be politically disastrous, and would also risk the finance bill not being passed at all.

And your personal tax is calculated, by you, before Jan 31st on the subsequent tax year. Not the end of the tax year.

And it’s ‘led’ to believe.

HTH

[jamesbrown]

That’s not how they do it......
Budgets make changes for the upcoming tax year.
NOT the current tax year. To do so would be politically disastrous, and would also risk the finance bill not being passed at all.

And your personal tax is calculated, by you, before Jan 31st on the subsequent tax year. Not the end of the tax year.

And it’s ‘led’ to believe.

HTH

Sort of.

Provisional collection of taxes - Erskine May - UK Parliament

But you're right in the sense that major variations to major taxes are typically applied at the start of a new tax year and the budget day resolution focuses on things like customs and excise duties or anti-avoidance measures.

[Lance]

Thank you for your response. The bit that I needed reassuring on was, even though I have my distribution, I have yet to pay tax on it. I'm lead to believe that tax will be calculated on my personal tax return at the end of the current tax year. So if in the budget at the end of this tax year the chancellor changes CGT, scraps ER, etc, with immediate effect, then I cannot see how my accountant and liquidator can see I'm immune to it. I don't see how my already having my distribution makes me immune.

That’s not how they do it......
Budgets make changes for the upcoming tax year.
NOT the current tax year. To do so would be politically disastrous, and would also risk the finance bill not being passed at all.

And your personal tax is calculated, by you, before Jan 31st on the subsequent tax year. Not the end of the tax year.

And it’s ‘led’ to believe.

HTH

[heyya99]

You already have your distribution.
You have a professional opinion from your accountant, an opinion you presumably paid for.
You have a professional opinion from your liquidator, an opinion you presumably paid for.
Your lack of faith in these was disturbing, but I appreciate that liquidation is a stressful event, especially when you have to hand over your working life's worth of bank account to a stranger to manage and distribute for you.

But anyway, you were fretting because of an OTS report that cannot affect you. Don't worry about it. I would bet $250k on a November FTSE100 4500 Put option that you're OK.

On a related note, I have been researching into Liquidation with outstanding Directors Loans & ITTOIA05/S415 (because that's what we do on a Sunday) and will be writing up a separate post about that this week.

Thank you for your response. The bit that I needed reassuring on was, even though I have my distribution, I have yet to pay tax on it. I'm lead to believe that tax will be calculated on my personal tax return at the end of the current tax year. So if in the budget at the end of this tax year the chancellor changes CGT, scraps ER, etc, with immediate effect, then I cannot see how my accountant and liquidator can see I'm immune to it. I don't see how my already having my distribution makes me immune.

[ChimpMaster]

So my getting an extra opinion wasn't so disturbing after all.

You already have your distribution.
You have a professional opinion from your accountant, an opinion you presumably paid for.
You have a professional opinion from your liquidator, an opinion you presumably paid for.
Your lack of faith in these was disturbing, but I appreciate that liquidation is a stressful event, especially when you have to hand over your working life's worth of bank account to a stranger to manage and distribute for you.

But anyway, you were fretting because of an OTS report that cannot affect you. Don't worry about it. I would bet $250k on a November FTSE100 4500 Put option that you're OK.

On a related note, I have been researching into Liquidation with outstanding Directors Loans & ITTOIA05/S415 (because that's what we do on a Sunday) and will be writing up a separate post about that this week.

[heyya99]

Though having said the above and now having read the report, it's clear that the OTS and government are looking at BADR yet again.

I hope they don't rush anything into the March 2021 budget, and instead at least spend a few months the following section of the OTS report:-

3.93 If the government chooses to take this forward, it should undertake a thorough analysis of the types of businesses and taxpayers potentially affected, and engage with relevant industry bodies to minimise the extent to
which any changes would be likely to distort the choice of how a business is operated or set up in other ways.

So my getting an extra opinion wasn't so disturbing after all.

[jamesbrown]

Seems highly unlikely to me that they'd take the political hit (at least among traditional Tory voters) on aligning CGT and income tax and then leave ER behind, untouched.

[ChimpMaster]

I wouldn't worry about it just yet. Especially as the paragraph hasn't been been proof-read.

ER/BADR was nerfed last time rather than removed entirely because most of the tax advantage was at the £1m+ level. By retaining a lifetime £1m allowance the government still wish to encourage some entrepreneurship (well, so they say...).

Though having said the above and now having read the report, it's clear that the OTS and government are looking at BADR yet again.

I hope they don't rush anything into the March 2021 budget, and instead at least spend a few months the following section of the OTS report:-

3.93 If the government chooses to take this forward, it should undertake a thorough analysis of the types of businesses and taxpayers potentially affected, and engage with relevant industry bodies to minimise the extent to
which any changes would be likely to distort the choice of how a business is operated or set up in other ways.

[ChimpMaster]

If you read the OTS report you can see that ER is also within their sights and their recommendation is that any retained earnings should only be extracted at income tax rates


See section 3.79
"One solution would be to tax some or all of the retained earnings remaining
in the business on liquidation or sale at dividend rates – in effect shifting the
boundary between Capital Gains Tax and Income Tax in these situations. This
could create make the treatment of cash taken out of the business during
and at the end of its life more neutral"


Given the state of UK finances it wouldn't surprise me if we see these recommendations implemented at the next budget which would mean the end of ER, regardless of what happens with the CGT rates

I wouldn't worry about it just yet. Especially as the paragraph hasn't been been proof-read.

ER/BADR was nerfed last time rather than removed entirely because most of the tax advantage was at the £1m+ level. By retaining a lifetime £1m allowance the government still wish to encourage some entrepreneurship (well, so they say...).

[dingdong]

If you read the OTS report you can see that ER is also within their sights and their recommendation is that any retained earnings should only be extracted at income tax rates


See section 3.79
"One solution would be to tax some or all of the retained earnings remaining
in the business on liquidation or sale at dividend rates – in effect shifting the
boundary between Capital Gains Tax and Income Tax in these situations. This
could create make the treatment of cash taken out of the business during
and at the end of its life more neutral"


Given the state of UK finances it wouldn't surprise me if we see these recommendations implemented at the next budget which would mean the end of ER, regardless of what happens with the CGT rates

[heyya99]

Just need to look who the OP is. (disrespect to the posters on this forum )

If you are struggling I can give you a sub? It's not like I don't have lots of it to spare

[northernladuk]

I find it disturbing that you don't trust the same answer that you received from both the accountant and the liquidator, and instead have come here to ask a random group of computer nerds.

Just need to look who the OP is. (disrespect to the posters on this forum )

[Maslins]

I find it disturbing that you don't trust the same answer that you received from both the accountant and the liquidator, and instead have come here to ask a random group of computer nerds.

This (no disrespect to posters on this forum )

[NowPermOutsideUK]

CG Tax is based on the transaction date. Besides, there isn't any noise about removal of BADR / ER. They already nerfed it last time.

If your distribution has been made then you can apply for BADR (ER) on it.

I find it disturbing that you don't trust the same answer that you received from both the accountant and the liquidator, and instead have come here to ask a random group of computer nerds.

This is correct - The more interesting question is whether people are thinking now of moving their assets from personal to Ltd or vice versa for the following two reasons - I am thinking specifically of property assets:

1) CGT tax rates are bound to go up so paying 28% of the gain locks that in and the gains have been realised and the slate wiped clean

2) Ltd incorporation allows rental income to be staggered / throtled and therefore only subject to 19% corp tax rather then 40% tax

3) Now seems like a cheap time because of stamp duty holiday although you will have to pay 3% SDLT

[ChimpMaster]

CG Tax is based on the transaction date. Besides, there isn't any noise about removal of BADR / ER. They already nerfed it last time.

If your distribution has been made then you can apply for BADR (ER) on it.

I find it disturbing that you don't trust the same answer that you received from both the accountant and the liquidator, and instead have come here to ask a random group of computer nerds.