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Corporation Tax

Business Succession and Inheritance Tax…

Clients regularly talk to us about their key points of concern when considering what the future will hold for their valuable assets once they have passed away – squandered inheritance or claims on the estate, and Inheritance Tax.  

Following death, legacies can be carved up by squabbling families, spent or claimed against as part of divorce proceedings, turning valuable, profitable and income producing businesses in to no more than a headache for the recipients of a will.  

Inheritance Tax (“IHT”) can worsen that headache significantly; often publicised as the UK’s most hated tax, it broadly operates by taxing the value of a person’s estate which is over and above the nil rate band (currently £325,000). 

While the nil rate band has been frozen since 2009, property (perhaps the most often inherited asset class except from cash) prices have risen significantly, which has resulted in more and more estates and households becoming liable to the tax.  

IHT can be complex and where due consideration and foresight has not been given, dismay and confusion can ensue at what is generally one of the most emotional periods of our lifetimes. 

Proper planning and forethought can moderate the complexities involved with succession and IHT and can help to provide clarity and control to the taxpayer and their loved ones. With proper planning and support It is possible to protect and retain assets intended to be bequeathed for future generations. We have set out an example below of the planning process a family might go through and the benefits that they and their family could enjoy as a result: 

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Review: Tax Avoidance Consultations

iStock_000046894284_XXXLargeAugust 2016 saw the launch of two consultation documents by HMRC; the first, a technical consultation entitled Tackling Disguised Remuneration, and the second, a discussion document entitled Strengthening Tax Avoidance Sanctions and Deterrents, both of which share a common theme which is to influence the behaviour of promoters, intermediaries and taxpayers themselves, as HMRC seeks to further enforce their clampdown on tax avoidance. Read more

What is the “Google Tax”?

googleLast year’s Autumn Statement introduced a number of favourable reforms and reliefs seemingly aimed at alleviating the financial pressures placed on the general public. However, this was not extended to profit shifting corporations who do business here in the UK with the Chancellor introducing the proposition of imposing significant levies on profits which are generated here, but are then transferred to lower-taxed jurisdictions. You may have heard this tax being referred to as the “Google Tax”, which is particularly unfair as this tax is not focused solely on Google or the technology industry, but when you consider that Google collects the majority of its UK generated profits in Ireland via a Dublin-registered holding company based in Bermuda, and has featured prominently in the Press because of this you can see why this has occurred.

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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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Client Case Study – Rental Property Portfolio

We were recently introduced to husband and wife clients who, whilst in the enviable position of owning significant amounts of residential letting property (£10m+), were unhappy with the complexity of the structures in which the properties were held.  For various reasons ownership of the properties was split over a number of entities including both a partnership and a limited company, with mortgages attached.

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