The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald
The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald.
By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.
There’s a film, starring Meryl Streep, called ‘It’s complicated’.
It’s got nothing whatsoever to do with tax matters, but the title came to mind while writing this week’s Money Matters column.
Completing the journey we started last week, Money Matters takes a deeper look into the complicated world of Capital Taxes.
Hopefully, we’ve managed to put it into words you can all understand!
Here are some of the key areas where the Government has taken action –
Joint ventures, partnerships and ER
Changes introduced in 2015 to combat abuse of ER (Entrepreneurs’ Relief) also resulted in relief not being due to investors in some types of genuine commercial structures where tax avoidance was not a main motive.
Those affected were companies with shares in joint venture companies and corporate partners in partnerships, because their investments were reclassified as non-trading activities.
ER is only available to companies or partnerships which are predominantly trading, so ER status was lost in a number of cases.
To enable genuine commercial structures to qualify for ER, this measure changes the definitions of a ‘trading company’ and a ‘trading group’ which apply for ER.
Where the new definitions apply, a company which holds shares in a joint venture company will be treated as carrying on a proportion of the activities of that company corresponding to the investing company’s fractional shareholding in it.
Also, the activities of a corporate partner in a firm will be treated as having their true nature (trading or non-trading) when determining whether the company is a trading company.
It will also be a requirement that the person making the disposal on which relief is claimed has at least a 5% interest in the shares of the joint venture company, and effectively controls at least 5% of the voting rights in that company.
Where a partnership with a corporate partner is concerned, the person making the disposal must be entitled to at least 5% of the partnership’s assets and profits, and control at least 5% of the voting rights in the corporate partner.
The new definitions mean that, in some cases, whether a company is a trading company or the holding company of a trading group will depend on the size of the claimant’s shareholding in the company.
External investors and ER
ER will be extended to external investors (other than employees or officers of the company) in unlisted trading companies. To qualify for the 10% CGT rate under ‘investors’ relief’ the following conditions will apply:
Capital gains and employee shareholder agreements
The ‘employee shareholder’ was a new employment status made available from 1 September 2013.
Employee shareholders who agreed to give up certain statutory employment rights received in exchange at least £2,000 of shares in their employer or parent company free of income tax and national insurance. Qualifying conditions do apply.
Any eventual gains on shares received with an original value of up to £50,000 are CGT free.
However, a lifetime limit of £100,000 on the CGT exempt gains is introduced on disposals under Employee Shareholder Agreements entered into after 16 March 2016.
So . . . that’s the lowdown on some of the nitty-gritty on capital tax issues. Next week’s column will be less testing . . . promise!
You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) -
http://www.clayshawbutler.com/news/latest-news-for-business
We have a strong and experienced team with great local knowledge all geared-up to helping you get the very best from your finances – whether that is as an individual or as a business.
We stay ahead of the game by putting great store by continual professional development for our staff.
With Investors In People status at Clay Shaw Butler, we care passionately about making sure our staff have all the tools they need to serve you, our customers.
Weblink -http://www.clayshawbutler.com
The team at Clay Shaw Butler can be contacted on 01267 228500.
The team at Clay Shaw Butler are on Twitter. Look for @clayshawbutler.
It’s got nothing whatsoever to do with tax matters, but the title came to mind while writing this week’s Money Matters column.
Completing the journey we started last week, Money Matters takes a deeper look into the complicated world of Capital Taxes.
Hopefully, we’ve managed to put it into words you can all understand!
Here are some of the key areas where the Government has taken action –
Joint ventures, partnerships and ER
Changes introduced in 2015 to combat abuse of ER (Entrepreneurs’ Relief) also resulted in relief not being due to investors in some types of genuine commercial structures where tax avoidance was not a main motive.
Those affected were companies with shares in joint venture companies and corporate partners in partnerships, because their investments were reclassified as non-trading activities.
ER is only available to companies or partnerships which are predominantly trading, so ER status was lost in a number of cases.
To enable genuine commercial structures to qualify for ER, this measure changes the definitions of a ‘trading company’ and a ‘trading group’ which apply for ER.
Where the new definitions apply, a company which holds shares in a joint venture company will be treated as carrying on a proportion of the activities of that company corresponding to the investing company’s fractional shareholding in it.
Also, the activities of a corporate partner in a firm will be treated as having their true nature (trading or non-trading) when determining whether the company is a trading company.
It will also be a requirement that the person making the disposal on which relief is claimed has at least a 5% interest in the shares of the joint venture company, and effectively controls at least 5% of the voting rights in that company.
Where a partnership with a corporate partner is concerned, the person making the disposal must be entitled to at least 5% of the partnership’s assets and profits, and control at least 5% of the voting rights in the corporate partner.
The new definitions mean that, in some cases, whether a company is a trading company or the holding company of a trading group will depend on the size of the claimant’s shareholding in the company.
External investors and ER
ER will be extended to external investors (other than employees or officers of the company) in unlisted trading companies. To qualify for the 10% CGT rate under ‘investors’ relief’ the following conditions will apply:
- shares must be newly issued and subscribed for by the individual for new consideration
- be in an unlisted trading company, or an unlisted holding company of a trading group
- have been issued by the company on or after 17 March 2016 and have been held for a period of three years from 6 April 2016
- have been held continuously for a period of three years before disposal.
Capital gains and employee shareholder agreements
The ‘employee shareholder’ was a new employment status made available from 1 September 2013.
Employee shareholders who agreed to give up certain statutory employment rights received in exchange at least £2,000 of shares in their employer or parent company free of income tax and national insurance. Qualifying conditions do apply.
Any eventual gains on shares received with an original value of up to £50,000 are CGT free.
However, a lifetime limit of £100,000 on the CGT exempt gains is introduced on disposals under Employee Shareholder Agreements entered into after 16 March 2016.
So . . . that’s the lowdown on some of the nitty-gritty on capital tax issues. Next week’s column will be less testing . . . promise!
You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) -
http://www.clayshawbutler.com/news/latest-news-for-business
We have a strong and experienced team with great local knowledge all geared-up to helping you get the very best from your finances – whether that is as an individual or as a business.
We stay ahead of the game by putting great store by continual professional development for our staff.
With Investors In People status at Clay Shaw Butler, we care passionately about making sure our staff have all the tools they need to serve you, our customers.
Weblink -http://www.clayshawbutler.com
The team at Clay Shaw Butler can be contacted on 01267 228500.
The team at Clay Shaw Butler are on Twitter. Look for @clayshawbutler.
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