Blog: Tax News

Tax Bite – Latest position on EOT reforms – January 2025 update

In the Budget on 30 October last year, various changes were announced to the rules on sales to employee ownership trusts (EOTs). Most of the changes were aimed at tightening up the conditions for CGT relief, seemingly to address perceived abuse, examples being:-extending the period for disqualifying events (under which the CGT relief is withdrawn) from one to four tax years after the tax year...

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Tax Bite – Autumn Budget 2024 – CGT anti-forestalling and BADR, including elections

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...

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OCTOBER BUDGET - Implications for Business Owners

Yesterday (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...

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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 (or anyone connected with any such person) will be employment-related securities for tax purposes, bringing...

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BADR - Business Asset Disposal Relief or “Be Aware of Defective Rounding” - the 5% tests

Where 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...

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Tax Bite – Refresher on Demergers

Demergers 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...

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Tax Bite – EMI share valuations – recent developments

Tax 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...

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Tax Bite – Hive-downs

Where 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...

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Tax Bite – W&I insurance-backed M&A deals – Cover for tax liabilities

Warranty 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...

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Tax Bite - EIS deferral relief/SEIS reinvestment relief: often forgotten

EIS 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...

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Tax Bite - Alternatives to EMI Options

EMI 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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Tax Bite - Royal Assent to the Finance Bill – Changes for tax-advantaged share options and share investment

On 11 July 2023, the Finance (No 2) Bill 2023 received Royal Assent. This has given effect to a number of relaxations and increases in limits relevant to tax-advantaged share options and share investments: Enterprise Management Incentive (EMI) Options The requirement to include within the option contract details of any restrictions that apply to the shares no longer applies. As best practice, we...

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