Entrepreneurs Relief, and then new company

Entrepreneurs Relief, and then new company

Didn't find your answer?

Dear AW

I'm acting for a client who has heard 'from his mate at the pub' that if he liquidates his company and receives the excess capital he can claim ER (subject to the qualifying conditions) and go set up a new company and continue on.

He's thinking of doing this and continuing on in the same trade, with probably the same clients.

I can't see anywhere where this is forbidden, as the ER treatment attaches to the disposal of his shares.

Other than the lifetime allowance, is there something I'm missing somewhere where he would be prevented from doing this or at risk of having the ER treatment being disallowed?

Thanks in advance.

Michael

Replies (9)

Please login or register to join the discussion.

By cheekychappy
25th Nov 2015 18:16

Look at
Transactions in securities.

Thanks (0)
avatar
By michaelblake
25th Nov 2015 19:44

ITA 2007, Part 13, Ch 1

See also the warnings in Peter Rayney's article in Taxation Magazine on 10 July 2013

http://www.taxation.co.uk/taxation/Articles/2013/07/10/310261/don%E2%80%...

Thanks (2)
avatar
By Matrix
25th Nov 2015 22:12

This is a Phoenix structure and does not work.

Thanks (0)
By Ruddles
26th Nov 2015 15:49

Piggy-backing onto this query

What if company is liquidated and shareholder continues as sole trader? Given that a liquidation itself is (still) not considered to be a transaction in securities, and there will be no other securities involved, are we outside TiS? Or, following one of the cases referred to, is the combination of the liquidation and an agreement to liquidate sufficient to catch us?

Presumably a straightforward liquidation and distribution of assets would not involve the type of agreement that featured in Joiner?

Thanks (0)
avatar
By Justin Bryant
26th Nov 2015 16:12

It was announced in yesterday's 2015 Autumn statement
That voluntary liquidations of companies that are then re-opened by the same controlling shareholders will result in income tax rather than CGT under tighter TiS rules in next month's FB 2016.

Thanks (1)
By Ruddles
26th Nov 2015 16:17

@Justin

Where is the text of that announcement?

Thanks (0)
By Ruddles
26th Nov 2015 16:29

Thanks, Justin

I guess that while many will consider TiS and case law to be sufficient to catch such transactions, they're attempting to get rid of any doubt as to whether transactions involving liquidations are in or are out of TiS.

Thanks (0)
By Michael Beaver
26th Nov 2015 17:35

Thanks all.

I've advised my client to avoid this tactic.

Thanks (0)