19 August 2020: Rishi Sunak has ordered a review of the Capital Gains Tax (“CGT”) system to include a review of whether allowances and reliefs could be simplified or scrapped.
Members’ Voluntary Liquidations (“MVLs”) are one area that may be significantly affected as a consequence of that review. MVLs are usually tax driven processes to extract funds from a company for shareholders when the business has been sold or ceased to trade. Tax rates can be as generous as 10% on the first £1m (earlier this year it was £10m) if you qualify for Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief) and any monies or assets distributed by a liquidator are subject to CGT, not income tax, hence the attractive tax rates.
With a black hole likely stretching to hundreds of billions of pounds due to the Covid-19 pandemic, it has to be paid for somehow. Whilst we can only guess whether CGT and Business Asset Disposal Relief will be in his sights this specific review gives us some indication that it is.
At BRI Business Recovery and Insolvency, we deal with a significant number of MVLs. We help to plan the timing and method of distributions often ensuring that the client is holding all of their funds rather than us.
If you or your clients are looking to retain their cash and extract it tax-efficiently by way of an MVL then please do speak with any of the BRI management team for further information.