Targetted Anti-avoidance Rule

28th December 2015

10% Tax Rate: Loophole closed for serial liquidators.
The 2015 Autumn Statement, recently published as the Finance Bill 2016, introduces a new targeted anti-avoidance tax rule to stop contractors regularly liquidating their company then starting a new company, to extract profits at a personal tax rate of just under 10% rather than the usual effective rate of 25%+:

These new rules, effective from 6 April 2016, will tax such distributions as income rather than capital when 3 conditions are met:

  1. an individual (S) who is a shareholder in a close company (C) receives from C a distribution in respect of shares in a winding-up
  2. within a period of two years after the distribution, S continues to be involved in a similar trade or activity
  3. the circumstances surrounding the winding-up have the main purpose, or one of the main purposes, of obtaining a tax advantage


 
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