On 9th December 2015, HMRC published a Consultation Document looking at company distributions, especially capital returns to shareholders.
Within the document HMRC have proposed to review closely the rules regarding capital distributions and tighten up on anti-avoidance legislation, including the introduction of a specific anti-avoidance rule aimed at ‘phoenix’ arrangements. These rules are scheduled to be introduced with effect from 6 April 2016.
In particular, the targeted rule will treat any distributions on a solvent winding up of the company (“MVL”) as income distributions where:
- an individual who is a shareholder in a closed company receives a distribution in respect of shares in a winding-up from the company; and
- within a period of two years after the distribution, the shareholder continues to be involved in a similar trade or activity; and
- the circumstances surrounding the winding-up have the main purpose, or one of the main purposes, of obtaining a tax advantage.
Further clarification has been sought, and obtained from HMRC as to the definition of “to be involved” and they have confirmed that this will not include any subsequent “employment” in a business trading in the same sector but will prevent the director setting up or being involved in the management of a new company doing the same type of business.
Any Contractors or Freelancers who trade through their own Limited Company and are thinking of using the MVL procedure in 2016 must seek advice before placing the company into MVL and in certain circumstances (where they are setting up another business in the same sector) will need to act before April 2016.
Through our expert affiliate Partner we are able to offer advice on whether an MVL would be cost efficient, and we can offer very competitive rates if an MVL is an appropriate solution for your business. We can even obtain the appropriate tax clearances from HM Revenue & Customs, so you don’t have to.
If you have questions like…
- How much will an MVL cost?
- What will I be taxed?
- Can I qualify for Entrepreneurs Relief?
- Will this affect my credit rating?
..then get in touch with Gorilla, expert accountants for Contractors and Freelancers on 0330 024 0406.
