Entrepreneur’s relief  ("ER") is a valuable relief from Capital Gains Tax ("CGT") which, when available, restricts the tax rate to a flat 10% on up to £10 million worth of lifetime gains. The 2018 Budget announced changes to the conditions for obtaining ER, and in light of the new rules it may be worthwhile for taxpayers to dispose of relevant assets before 6 April 2019. Minimum Qualifying Period ER applies to disposals of: shares in a trading company; (the whole or part of) a business; assets in association with the sale of a business; assets from a solvent company that has ceased trading. For disposals involving shares, the shareholder would need to work for the company and hold at least 5% of the ordinary s...

A corporate restructuring takes place where a company and/or a group of companies undergo a process of reorganising the ownership structure for the benefit of the business. Common reasons for a restructuring include a change of ownership, mergers (i.e. merging two or more separate companies into one), and demergers (i.e. the separation of a company into two or more smaller companies). From a tax perspective, the term “reorganisation” is not defined in the legislation. However, it is accepted that it refers to a company organising its share capital in a different way. Where the transactions in a reorganisation meet certain conditions for tax purposes, the reorganisation is not treated as involving a disposal of the original sha...

With less than 6 weeks to go until most VAT registered businesses are required to comply with MTD, there is still concern that not enough progress has been made on making business owners aware of the new rules. Only 1 in 200 eligible businesses have already signed up to MTD, and HMRC has published research indicating that as at December 2018, 1 in 5 businesses required to join hadn't even heard of it. Adrian Rudd, Chair of the joint CIOT/ATT Digitalisation and Agent Strategy Working Group has said "We note that by far the most common way those who are aware of MTD have been made aware is by their tax adviser or accountant. We and our members will continue to do what we can to raise awareness over the months ahead but it is likely tha...

Whether a property is residential or non-residential for Stamp Duty Land Tax ("SDLT") purposes is not always clear cut, and this will affect the tax payable and also the reliefs/exemptions that might apply. Residential rates can be as high as 15% (where the 3% surcharge applies), whilst non-residential rates top out at 5%. Mixed use properties (used for both residential and non-residential purposes) are subject to non-residential rates. In light of the different rates and reliefs that can apply, it is crucial that the nature of the property is correctly identified at the time of purchase. HMRC has recently clarified their views and guidance on what constitutes residential property for SDLT purposes - some of the points discussed ar...

It was announced in the Budget 2018 that the government was introducing a new Structures and Buildings Allowance ("SBA") for costs incurred in relation to the construction, conversion, and/or renovation of non-residential structures and buildings. Effective from 29 October 2018, the SBA is available on the construction, conversion, and/or renovation costs relating to non-residential structures located in the UK or overseas. Please note that the SBA is only available for projects where the contract was entered into on or after 29 October 2018. The SBA is given at an annual rate of 2% on a straight-line basis for a fixed 50-year period from the date the structure comes into use.  Interestingly, there will not be a system of balancing ...

In the 2018 Budget, the Chancellor announced changes to the conditions for Entrepreneurs' Relief ("ER") which will restrict its availability to certain shareholders. Previous Rules Prior to the budget, ER was available on the sale of shares in a trading company provided that for a period of 12 months up to the date of disposal: The seller was an employee/office holder of the company; and The company was their "personal company". Personal company was defined as a company in which you held at least 5% of the issued ordinary share capital and 5% of the voting rights. Changes 1. Extension of Qualifying Period to 24 Months The first change announced was that from 6 April 2019, the minimum period throughout which the co...

In Dieno George v HMRC, the First-Tier Tribunal (FTT) denied a claim for entrepreneurs’ relief (ER) by a chief executive on a 6.9% shareholding in the limited company. The case highlights the importance of meeting the exact conditions of the legislation, even where circumstances might suggest that such conditions are met and that the relief may be obtained. Background Mr George (the taxpayer) was recruited by Thornton & Ross Limited (the company) in October 2001, successfully working to expand the company’s business and obtaining the position of chief executive in Mach 2002. The taxpayer subscribed £999,996 for 600 C Ordinary shares in the company in 2005, and a further £10,000 for 1547 D Ordinary shares in 2008. These ...

Deciding if/when to incorporate your business is an important consideration that many entrepreneurs will face in the life-cycle of their business. Before a decision can be made as to whether incorporation is right for you, it is important to be aware of what a limited company is, and how it differs from operating as a sole trader/partnership. What is a limited company (Ltd)? A UK private limited company is a separate legal entity, with its own assets and liabilities. When operating as a sole-trader or a partnership, assets and liabilities of the business will belong to the individual or partner. Companies are owned by shareholders through the issue of shares. If you own shares in company (which may be purchased from another shar...

Here are some of the highlights from the Chancellor of the Exchequer's 2018 Budget (published on 29 October 2018): Personal Tax The Personal Allowance will be raised to £12,500 and the Higher Rate Threshold (i.e. the amount that an individual can earn before paying higher rate tax) to £50,000 in April 2019 – a year earlier than planned. These levels will remain the same in 2020/21, and then increase by CPI going forward. The final exemption period for Principal Private Residence Relief (PPR) which provides Capital Gains Tax relief on the sale of your home will be reduced from 18 to 9 months. Under the current PPR rules, where you have let a property which at one point was your home Lettings Relief may be available to reduc...

Under the Construction Industry Scheme (CIS), contractors are required to deduct funds from a subcontractor's payment and forward it directly to HMRC, which in turn are deemed to be advance payments towards the subcontractors' tax liabilities. Who is involved in CIS? Businesses that carry out construction work may be required to register under CIS, regardless of the nature of the business itself. These businesses can involve contractors, subcontractors, and/or a mixture of both. Construction work relating to a permanent or temporary building/structure and civil engineering work (e.g. roads) will be covered by CIS, and includes the following: Preparation of a site Demolition Building Repairs Alterations and decoarti...