1 March 2016: You may wish to consider a sooner-rather-than-later approach to winding up with the threat that Entrepreneurs' Relief is to end soon for many shareholders in Members’ Voluntary Liquidations ("MVL"). An MVL is almost always a tax driven process to extract funds from a company in a tax efficient manner.
At the time of writing (February 2016), the Draft Finance Bill 2016 is in consultation and is likely to propose much tougher restrictions, in the form of anti-avoidance regulations, upon shareholders seeking to extract funds via an MVL. Currently, any shareholder who would ordinarily qualify for Entrepreneurs' Relief can gain this relief obtaining an attractive rate of tax at only 10%.
The Draft Finance Bill 2016 proposes restrictions to prevent qualification for the Relief in the following circumstances:
- where a shareholder is a member of a close company(note that most SMEs are close companies);
- where a shareholder becomes involved in a similar trade or industry within two years from the date the company was wound up (e.g. phoenixes);
- one of the main aims of the winding up was to pay less tax (as is the case in almost all MVLs).
At the time of writing, it is expected that the legislation will be enacted on 1 April 2016.
To enable you to benefit before this date we can distribute cash at bank or assets (debtors, property, vehicles, stock, directors’ loans - often in specie and without selling them) as per the directors'/shareholders' requirements. We would be happy to plan out any proposed distributions and timings as required.
Finally, to ensure that you benefit from legal and qualifying tax efficient distributions please speak with any of the members of the BRI management team without delay. Telephone 01604 754352 or e-mail email@example.com quoting this article.