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Tax Bite - Share buybacks - Update

Tax Bite – Share buybacks – Update A company purchase of own shares, or buyback, is a popular way of implementing corporate succession, but is not without tax challenges and risks. Corporate lawyers will be familiar with the company law rule that a buyback cannot include deferred consideration. Most will also be aware of the basic tax rule that the proceeds of a buyback from an individual (above...

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Loans to Participators - wider than you might expect

In this Tax Bite, we look very briefly the often-overlooked loans to participators rules. These rules are something to be aware of whenever you are dealing with a close company, which in broad terms is a company that is controlled by five or fewer “participators” (i.e. shareholders and their associates). If a close company makes a loan to a participator, and the loan remains outstanding 9 months...

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Employee Ownership Trusts

Tax Bite - Employee Ownership Trusts The Employee Ownership Trust (“EOT”) legislation was introduced in 2014. Since the news of a possible rise in CGT rates at some point in the relatively near future, more business owners have been looking to achieve an exit and as a result EOTs are currently on a lot of people’s radars. As a headline, the CGT relief afforded to shareholders is hard to ignore –...

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Section 431 Elections

Tax Bite – Section 431 Elections In this Tax Bite, we give you a refresher on section 431 elections, with a focus on practical points and tips for transactions. Background – what are s431 elections and what do they do? Almost all shares acquired by a director (including a non-executive director) or employee of a company will be employment-related securities for tax purposes, bringing them within...

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Temporary extension to trading loss carry-back rules - implications for deals

Tax Bite – Temporary extension to trading loss carry-back rules – implications for deals We noted in a previous Tax Bite that the Spring Budget on 3 March 2021 included proposals for a temporary increase in the carry-back period for trading losses in response to the impact upon businesses of the COVID-19 pandemic. In certain circumstances the carry back period has been extended to the three...

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Simplifying VAT on Land and Property?

Property Tax Bite – Simplifying VAT on Land and Property? There is no doubt that the VAT treatment of land and property is complex. Starting from the most basic statement, set out in the legislation, that interests in land are exempt from VAT, the exceptions to that rule come thick and fast, and that is before considering zero-rating and reduced rating of certain supplies, and exceptions to the...

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Growth Shares

Tax Bite – Growth Shares Growth shares are a popular form of equity incentive, particularly where enterprise management incentive (EMI) options are unavailable. This might be, for example, because: • The company carries on significant “excluded” or non-trading activities for EMI purposes, so does not meet the trading status requirement; • The incentive is to be in a subsidiary company; • The...

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Treatment of Discretions in relation to EMI Options

Treatment of Discretions in relation to EMI Options As you may be aware, HMRC have recently been taking a harder line on the treatment of the exercise of discretions in EMI option documents, with the result that they have been taking the view that where a discretion is exercised, an EMI option should be taxed as an unapproved option to the extent of the exercise of the discretion. It is common...

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SDLT sub sale relief

Property Tax Bite – SDLT sub-sale relief In sub-sale transactions, the availability of relief from SDLT for the intermediate purchaser is crucial. In most commercial sub-sales, the facts should support the relief being available, but as ever there are issues and pitfalls to watch out for. In this Tax Bite we very briefly summarise the key requirements for a “normal” sub-sale where A enters into a...

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Stamp Duty on inserting a new Holding Company

Tax Bite – Stamp Duty on inserting a new holding company This Tax Bite follows on from our Bite of 24 June, covering topical tax issues on demergers. As we explained in that Bite, there is a stamp duty relief, known as section 77 relief, which can apply where a new holding company is placed on top of an existing company / group, which is typically the first step in a demerger or other...

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Spring Budget 2021 Tax Bite

Tax Bite – Spring 2021 Budget The Budget delivered yesterday did not produce any of the immediate tax shocks that had been feared in light of the effect of the Covid-19 pandemic on the country’s finances. In particular, no immediate increases in tax rates were announced, and business asset disposal relief (previously entrepreneurs’ relief), whilst having been severely curtailed in the 2020...

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VAT - Property TOGCs - Tips, reminders, pitfalls

VAT - Property TOGCs – Tips, reminders, pitfalls Here’s our ten starters for ten on property TOGCs: 1. Does the Buyer need to opt to tax? It is often assumed that the Buyer always has to opt for the transfer to be a TOGC, but that’s not correct. The Buyer only has to opt if the sale would otherwise be VATable, e.g. if the Seller has opted or the sale is of a “new” commercial freehold, so...

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