Increased interest in solvent liquidations for small business owners

Tax Comments Off on Increased interest in solvent liquidations for small business owners

The impending changes to the taxation of dividends for entrepreneurs and small business owners is likely to result in an increase in solvent liquidations over the next few months.

If the proposed changes go ahead on 6 April 2016, it will be more expensive for individual shareholders to accumulate and extract surplus cash funds or profits from their companies.

Currently, surplus funds distributed through a members’ voluntary liquidation are treated as capital distributions and, providing certain conditions are met, the shareholders have the benefit of Entrepreneurs’ Relief which reduces the tax rate to 10%.

Under the proposed changes, such distributions may be subject to Income Tax, which would greatly increase the tax bill for the shareholders.

It is also likely that HM Revenue & Customs will be looking more closely at the commercial purpose for winding up a company, particularly if a new company is set up to replace it within two years.

If you feel you could potentially be affected by the proposed changes, you will need to act quickly to receive the benefits currently available.

We would be more than happy to discuss the above with you.

If you would like any further information and advice on the proposed tax changes or solvent liquidations, please contact Sue Stephens or John Elliott.