We noted in our Tax Bite of 31 October (https://parisitax.co.uk/blog/october-budget-implications-for-business-owners) the key changes to CGT rates announced in the budget the previous day, being:An increase in the main rate of CGT from 20% to 24% for sales on or after 30 October (and a change in the corresponding basic (lower band) rate from 10% to 18%); and Business asset disposal relief...
Read moreYesterday (30 October 2024) as you know Rachel Reeves delivered her much awaited first Budget. The big headline in terms of tax increases was, of course, the rise in employer’s NIC to 15% and the lowering of the level at which it applies, which together with the increase to the minimum wage adds significant costs to businesses. A sigh of relief was breathed that the main rate of CGT will rise...
Read moreIn 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 (or anyone connected with any such person) will be employment-related securities for tax purposes, bringing...
Read moreWhere business asset disposal relief (BADR) is available and claimed, it reduces the rate of capital gains tax (CGT) on the sale of the asset (e.g. shares), subject to a lifetime limit of £1 million of gains. Based on the rates of CGT currently in force, the rate of CGT drops from 20% to 10%, so the saving is significant. As with all reliefs, a number of conditions have to be satisfied in order...
Read moreDemergers are popular as a way of separating trades / businesses (including investment businesses) in a tax efficient manner. They can be used in preparation for a sale, prior to an investment, or just as a commercial strategy to ring-fence one business or asset base from another. Broadly, provided they are correctly structured they can allow for this with no or minimal tax leakage. Over time...
Read moreThe Budget on 6 March contained one significant SDLT announcement which had not been seen coming, the abolition of multiple dwellings relief (“MDR”). MDR was introduced to the SDLT regime in 2011 and provides relief for purchases of, as the name suggests, multiple dwellings acquired in, or as part of, the same transaction (or across linked transactions) and essentially means SDLT is calculated on...
Read moreEOTs were introduced to promote employee ownership of companies, and the tax benefits (the principal one of which being a complete CGT exemption for the selling shareholders on the sale of a controlling stake in the company to an EOT, subject to various conditions) were intended to encourage such transactions and ownership structures. A consultation into EOTs was announced as part of Budget 2023...
Read moreTax Bite – EMI share valuations – recent developments In addition to the considerable tax benefits of enterprise management incentive (EMI) options, the ability to agree with HMRC the market value of shares to be placed under EMI options is another really attractive feature of this type of share incentive. Outside of EMI and CSOP options, it is generally not possible to seek HMRC’s agreement to...
Read moreWhere a corporate seller is selling a business, instead of selling the business and assets directly to the buyer, a more attractive alternative can be to hive down the business into a (new or existing) subsidiary company, and sell the subsidiary company to a buyer. Hive-downs can be more attractive from a corporate seller’s tax perspective than a direct transfer of a business / assets to the...
Read moreWarranty and indemnity insurance is now a common feature in M&A deals. Sellers will typically anticipate at the outset that if the deal is backed by W&I insurance, their liability under the SPA warranties and Tax Covenant will be capped at £1. What is often not appreciated (sometimes by buyers and sellers alike) is that there will be a number of things that a Tax Covenant (and Tax...
Read moreEIS deferral relief/SEIS reinvestment relief: often forgotten The Enterprise Investment Scheme (EIS) is a UK venture capital scheme renowned for the generous tax reliefs it offers investors when investing in private companies. Along with its related relief (SEIS, for smaller start-up companies,) it provides income tax relief on the amount invested and a CGT free exit if all the conditions are met...
Read moreEMI options are the most attractive form of employee share incentives available, however they won’t always be available, for example where:The company is too big, in terms of numbers of employees or gross assets; The company carries on EMI-excluded activity or has investment activities; The individual is not a full-time employee; The individual already has £250,000 worth of EMI options, or...
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