Haslers warn business owners about the pitfalls of income tax arrangements when winding up a company

Haslers warn business owners about the pitfalls of income tax arrangements when winding up a company

Loughton-based Chartered Accountants, Haslers, has said that a new notice from HM Revenue & Customs has provided new guidance on the winding up of companies that shareholder and owners should be aware of.

The HMRC notice warns against the use of tax schemes that claim to avoid the Income Tax charge for shareholders when winding up a company.

According to Haslers, these schemes try to receive favourable Capital Gains Tax rates rather than Income Tax treatment, by changing the way shareholders take value out of their companies.

The purpose of these schemes is to circumvent the targeted anti-avoidance rule (TAAR), introduced in April 2016.

In order to achieve this, they make making an artificial modification of the arrangements aimed at defeating the intention of the legislation – by selling the company to a third party rather than winding it up.

In light of this, HMRC has promised to crack down on this behaviour and will explore any endeavours to avoid the income tax charge.

If it is claimed that the scheme does not cover the arrangements, HMRC will consider whether the general anti-abuse rule (GAAR) applies to the arrangement. Transactions after 14 September 2016 to which the GAAR applies will be subject to a 60 per cent user penalty.

Paul Reynolds, Tax Partner at Haslers, said: “HMRC has reiterated that a severe penalty regime exists in relation to such schemes – transactions after 14 September 2016 where the GAAR applies will be subject to a 60 per cent user penalty.

“Moreover, for transactions entered into on or after 16 November 2017, any person who enabled the use of these sorts of schemes may be subject to a penalty as an enabler of an abusive scheme.

“The penalty amount will be equal to the amount of consideration they received for enabling the arrangements. The user may also be subject to penalties for filing an inaccurate return, with penalties of up to 100 per cent of the undeclared tax.”

Haslers have an expert team of Tax and Insolvency specialists that can advise you through the pitfalls when winding up a company, ensuring that there is no requirement for the use of such schemes and ensuring that you exit the company in the most tax efficient way.

Haslers warn business owners about the pitfalls of income tax arrangements when winding up a company