New HM Revenue Proposals Likely to Affect Migrants Owning UK Companies

Jane Cooper 12 December, 2015

A new consultation paper issued by HM Revenue is proposing anti-avoidance legislation to prevent limited company owners from extracting income as capital.

These proposals are likely to prove highly controversial, as they include an attack on the capital gains tax treatment (often with Entrepreneurs Relief available, reducing the tax rate on the gain to 10%) where the shareholders of a company ” … retain profits in excess of the company‚Äôs commercial needs”, and receive retained profits as capital when the company is eventually liquidated, usually via a Members Voluntary Liquidation, or MVL.

The Revenue consultation describes these company as “moneybox companies.”

The consultation paper indicates that changes arising are likely to come into effect from the 6th of April, 2016 – not 2017.

When combined with the changes to the taxation of dividend income described in our earlier blog it appears that UK limited companies are under attack by what one would have thought would be a business friendly UK Government.

GM Tax recommends that those who might be affected – for example those who own UK limited companies and who are considering migrating – consider taking relatively urgent advice as to strategy in respect of the tax efficient extraction of funds.

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