Stop press : major tax changes in the pipeline for the taxation of OMBs
Major changes are being planned for the taxation of owner managed businesses (OMBs) – as emerged in the Finance Bill 2016 and explanatory consultation documents published this week.
In particular, from 6 April 2016:
• it will be more difficult for any OMB shareholder/entrepreneur to accumulate and extract surplus cash funds or profits from their companies at the beneficial 10% capital gains tax (CGT) rate;
• it is likely that accumulated funds extracted by shareholders/entrepreneurs will instead be taxed at the new higher dividend tax rate of 38.1%;
• certain industry sectors (such as property development) that traditionally operate via special purpose companies (SPVs), may no longer have access to the 10% CGT rates on the serial liquidations of their SPV companies, and could be taxed at the new dividend tax rate of 38.1% on the profits extracted from those companies;
• more stringent conditions may well apply to shareholders who wish to have their shares purchased by their own company and taxed at the beneficial 10% CGT rate.
These changes will not take effect until 6 April 2016, and there may well be opportunities for many businesses to ensure that relevant transactions are completed before the new rules come into effect.
Moore Stephens will be responding robustly to the consultation and will shortly be issuing more targeted guidance to specific sector and interest groups. In the meantime, if you would like advice on what you should do either before or after the 6 April deadline, then please get in contact with either your existing Moore Stephens tax or contact partners.