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Capital Gains Tax

SEIS – How Does it Work

SEED-EISIn March 2011, the government extended an olive branch to start-up companies by announcing proposals which were aimed at encouraging investment in new businesses. These proposals included a reform of the existing Enterprise Investment Scheme (EIS) and the introduction of the Seed Enterprise Investment Scheme (SEIS) which focusses on start-up companies and offers generous reliefs in the form of an income tax reduction and two capital gains tax exemptions to participating investors.

SEIS was originally intended to be a temporary measure to stimulate interest from angel investors, however, the success of the initial scheme resulted in £82m being invested into 1,100 companies by the end of 2013, providing a substantial incentive for the Government to remove any time restrictions and continue the availability of Income Tax (IT) and Capital Gains Tax (CGT) reliefs under the scheme.

This blog will look at the characteristics of the SEIS and its reliefs to discover why it has become so popular among investors.

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Employee Ownership Trust

In March 2013, the Government announced proposals to introduce relief from Capital Gains Tax (CGT) on the sale of an interest in a business into an employee ownership trust (EOT), along with a promise to further investigate employee focussed incentives in a bid to assist companies in the recruitment, retention and motivation of staff.

 

On 4 July 2013, the announcement was put to consultation so that the Government could take views on the proposals for CGT relief and Income Tax (IT) exemption. The provisions subsequently drafted have now been incorporated into the Finance Act 2014.

 

This document looks at the legislation published as a result of the consultation process, (the summary of responses to the consultation process can be found here) in particular relating to the CGT, IT, Inheritance Tax (IHT), and Corporation Tax (CT) reliefs which have now been made available to Employee Ownership Trusts (EOTs).

EOT’s are relatively well established although somewhat under-utilised due to the restrictions placed on trust property; however, these new reliefs should make the structure much more attractive. Focussing on increasing morale and productivity, the EOT is a form of trust which enables a company to sell and distribute shares to its staff. There are conditions which define what makes a trust an EOT, (such as the controlling interest requirement) and employees also have to meet certain criteria to qualify as a beneficiary of the trust, which we will look at below.

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Black Friday Proposals – A Call to Arms!

Normally, when we communicate via this medium we make every effort to deliver a balanced position on whatever proposals or actions have been taken by the Government in tandem with HMRC, on which we are commenting. However, two weeks on from the publication of the HMRC draft legislation on February 24th 2014, ‘Tackling Marketed Tax Avoidance’, which we have re-christened the ‘Black Friday Proposals’ we find it impossible to follow our usual tack. The proposals contained in the draft legislation and the new consultation document are at best, a blatant attempt to do nothing more than collect tax by any means whether due or not, but at worst are completely unconstitutional and represent a staggering potential abuse of power unlike any in recent history by a UK Government.
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Des non-res: the practicalities of tax exile

The concept of becoming a tax exile is well-established, and whilst no one has yet taken it to the extremes of rock star Hotblack Desiato in Douglas Adams, The Restaurant at the End of the Universe, who is unable to talk with Ford Prefect because “he’s spending a year dead for tax reasons,” there is a steady number of people who relocate abroad on the recommendation of their professional advisers in the hopes of avoiding one tax or another. However, recent moves by HMRC to extend the reach of their grasp has left exercising the practice of self-imposed exile even harder than understanding the theory, resulting in ever-increasing numbers of claims of non-residency now adding to the pressure on the tribunal and court systems.

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Autumn Statement 2013

Many of you will by now have either heard or read the Government’s Autumn Statement which was delivered earlier today. For those of you who have not and wish to read the statement you can do so by clicking here.
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