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...
Read more
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...
Read more
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...
Read more
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...
Read more
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...
Read more
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...
Read more
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...
Read more
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...
Read more
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...
Read more
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...
Read more
The deadline for employers to report events in relation to employment related shares (and other securities) and share options in respect of tax year 2022/23 is 6 July 2023.
Most companies will know that if they operate an HMRC-approved or tax-advantaged share option / incentive scheme such as EMI, CSOP, SIP or SAYE, there is an annual reporting requirement in relation to events happening during...
Read more
Tax Bite – Highlights of “Tax Day” – Stamp duty reform, and possible changes for EOTs?
Last Thursday 27 April was “Tax Administration and Maintenance Day”, which involved the publication of various consultations and proposals on tax measures, and the promise of more consultations to come.
Of most interest to those advising companies and their shareholders were:
The announcement that there will be...
Read more