OTS review of capital gains ...closure of limited company implications

[Cookielove]

Has anyone heard about this...I got an email from my accountant advising contractors to think about winding up their Ltd company in advance of any changes next year...I am assuming this is only a possibility it is not set that this will actually happen...?

Anyone else heard about had this? Thanks

[eek]

Has anyone heard about this...I got an email from my accountant advising contractors to think about winding up their Ltd company in advance of any changes next year...I am assuming this is only a possibility it is not set that this will actually happen...?

Anyone else heard about had this? Thanks

On what basis?

Entrepreneur relief was reduced from £10m to £1m this year so more closely align with the needs of small companies owners who invested profits in their business rather than their pension.

I really can't see that bit changing.

[Cookielove]

If you decide to liquidate your company there could be issues if changes are brought in next year....possible changes in CGT rates to align with income tax rates/change in tax free CGT allowance...

I don't know enough about it hence asking on here it seems to be if you decide to do a MVL...

[ladymuck]

What does your accountant say about the forthcoming changes? Sounds like a rather poor newsletter if it doesn't explain what the changes are going to be and the potential impact it could have in different circumstances.

[eek]

What does your accountant say about the forthcoming changes? Sounds like a rather poor newsletter if it doesn't explain what the changes are going to be and the potential impact it could have in different circumstances.

There are no announced forthcoming changes - it's a scare story attached to the announced OTS review.

We've discussed this before and the chances are that while how capital tax is treated will change the odds of entrepreneur relief changing is minimal due to the changes that occurred this year.

[ladymuck]

There are no announced forthcoming changes - it's a scare story attached to the announced OTS review.

We've discussed this before and the chances are that while how capital tax is treated will change the odds of entrepreneur relief changing is minimal due to the changes that occurred this year.

You weren't supposed to answer that question

[ChimpMaster]

There are no announced forthcoming changes - it's a scare story attached to the announced OTS review.

We've discussed this before and the chances are that while how capital tax is treated will change the odds of entrepreneur relief changing is minimal due to the changes that occurred this year.

It is a scare story but sometimes the govt/HMRC put these things out to test the waters and to lay the ground to hike taxes on 'greedy' middle classes / business people / landlords / <insert this month's target here>.

I am more wary of the link between CGT and BADR. At the moment CGT is 10%/20% on most assets, including company shares and distributions, so there isn't such a gulf between BADR and CGT. If the govt decides to put CGT up to 40% / 45% i.e. aligned with income taxes, then can they really justify the huge difference to 10% for BADR? The govt might feel the need to shift BADR up by a margin, just to keep the rates more in line.

There is another risk: if today you were to close your company and were denied BADR, you would 'only' suffer a 20% CGT rate instead of the expected 10% with relief. But if CGT is hiked next year, even if BADR is left untouched, if HMRC deny you the relief then you will get hit for 40% or 45% on the distribution. However, I do believe that most contractors wouldn't have a problem with the claim for BADR, assuming they haven't been getting funky with their business.

My accountant doesn't think taxes will go up in April. I'm not so sure, but I wouldn't rush to close my business if I still had a pipeline of work for the year. On the other hand, if you're out of work or likely to be in 2021 then it might well be a good idea to shut shop now.