Will entrepreneurs relief be the next thing to go?

[ian2012]

My ltd company has about 250k sitting in cash which I'd planned to pay out slowly as dividends over the years.

Osborne shafting contractors in the budget has ruined that plan. The marginal tax rate will be even worse than people in employment for any contractors going into the higher tax band when you take into CT already paid.

Given the fact that much stricter IR35 interpretation is coming and expenses will no longer be allowed I'm wondering if entrepreneur's relief will be the next thing to go.

Should I get out now while entrepreneur's relief is still in existence and pay 10% on the cash balance. Would joining an umbrella after taking ER be acceptable or would I need to then take a permie position?

[TheFaQQer]

Personally, I'd wait and see what happens before rushing any decisions - it's not like they will announce that from midnight tonight that ER is going (OK, I guess they could, but they probably won't).

T&S will be included in the Autumn Statement, so there's a few months yet to get through the responses and see whether anyone in government listens.

So I'd wait until it's definitely happening before rushing into shutting down the business - although the dividend tax is a definite.

[Maslins]

Tricky one.

Just me speculating, but I imagine if they did decide to make any significant changes to entrepreneurs relief, it likely would be a "from midnight tonight" change...albeit probably with some scope to allow it for disposals where there was already an unconditional obligation committed to. This seems to be what they've done with the intangible changes in the Summer budget of a couple of weeks ago.

I don't know to what extent the government see the likes of MVL Online as a tax avoidance "scheme"...but the dividend tax changes in isolation make an MVL even more appealing. Does therefore make me think it probably will be for the chop (or at least made less appealing) some time soon. Exactly when, who knows.

[TheFaQQer]

Just me speculating, but I imagine if they did decide to make any significant changes to entrepreneurs relief, it likely would be a "from midnight tonight" change...albeit probably with some scope to allow it for disposals where there was already an unconditional obligation committed to. This seems to be what they've done with the intangible changes in the Summer budget of a couple of weeks ago.

Wouldn't it require a statutory change to remove it from legislation?

The scrapping of ESC C16 was announced in the December / January time and then in place from March, IIRC.

[Dallas]

Jimmy Carr is doing it - maybe he knows something.

[Maslins]

Wouldn't it require a statutory change to remove it from legislation?

The scrapping of ESC C16 was announced in the December / January time and then in place from March, IIRC.

I'm no lawyer...but presumably they could change the rate quite easily if they decided to do so, potentially making it far less appealing.

[WordIsBond]

I'd speculate it is for the chop, or at least headed for serious restrictions for one man bands, and that there will be limited advance notice. If I had that kind of reserve, I'd seriously consider getting out. If you go umbrella, you aren't running the same business, are you? You've become an employee.

But if you are close to retirement, that could definitely change the picture. You could draw down a lot of dividends every year in retirement at less than 10% tax.

[jamesbrown]

Tricky one.

Just me speculating, but I imagine if they did decide to make any significant changes to entrepreneurs relief, it likely would be a "from midnight tonight" change...albeit probably with some scope to allow it for disposals where there was already an unconditional obligation committed to. This seems to be what they've done with the intangible changes in the Summer budget of a couple of weeks ago.

I don't know to what extent the government see the likes of MVL Online as a tax avoidance "scheme"...but the dividend tax changes in isolation make an MVL even more appealing. Does therefore make me think it probably will be for the chop (or at least made less appealing) some time soon. Exactly when, who knows.

Totally agree. It will likely be addressed, and I'd be very surprised if they lagged it. Any changes that introduce significant scope for tax planning (as with the stamp duty changes) are likely to be introduced immediately.

[AtW]

I can't see how ER would get any better so everybody now will be shutting down companies to take out money with ER, so yes, I am sure Gideon would nuke ER next, or make it such that it's impossible to use. If I remember correctly they were already looking into it in the last pre-budget (2014), could be wrong but I think ONS found that a lot more people were using it, so "loss" of tax was higher than predicted, I actually expected them to make changes in the last budget in March 2015, but I guess at the time they actually cared for votes of the business people, not any more they don't.

P.S. This is not a legal or financial advice.

[AtW]

But if you are close to retirement, that could definitely change the picture. You could draw down a lot of dividends every year in retirement at less than 10% tax.

Dividends tax would go up for sure, most likely it will be aligned with income tax bands.