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Chancellor shuts the door after the horse has bolted - again?

Chancellor shuts the door after the horse has...

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Yesterday, George Osborne, banned the use of Entrepreneurs Relief (ER) to be claimed when an unincorporated business incorporates and creates Goodwill which is then credited to the Driectors Loan Account and ER is then claimed on the Capital Gain and future drawings being relatively tax free.

Is this not another case (like Gordon Brown did) of shutting the door after the horse has bolted? Anyone who has not incorporated already and used the Goodwill facility (it worked even better when we had Taper Relief), deserves to suffer (or sue their accountant for not advising it!). I have advised clients to use the facility many times since incorporation became a tax (NIC) saving tool. As a result, none of my clients will need to use it in the future. Sorry, George, the horse has bolted!

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By stepurhan
04th Dec 2014 10:37

Future horses

So you don't think any new businesses will start in the future? Because a business that doesn't exist yet won't have incorporated will it. Whilst I'm sure he would have loved to make it retrospective, stopping a seemingly overgenerous tax break for the future must still make sense surely.

As for your "incorporation for all" comments, I really don't think you've thought it through. There is a lot more to incorporation than just the potential tax savings on introducing goodwill. Additional admin and compliance costs. Additional potential for fines. Benefit in kind issues, especially with vehicles with private use. Yes, above a certain profit level incorporation is likely to make sense, but I think an adviser who has incorporated all his clients is more open to being sued than one who has considered who it is suitable for.

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Replying to Accountant A:
By Briar
04th Dec 2014 16:31

Yes, I have thought it through

I always make sure that the additional costs will be covered by the savings. If they stay with me, there will not be any penalties or fines. I hardly ever advise putting cars (or property) into the company but explain the consequences if they are. Also, I don't usually recommend incorporating businesses which are basically letting off space in their property. After explaining my additional fees, my clients always say that they would rather pay me more than giving it to the taxman (and my fee will be less than the saving anyway). 

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By Chris Maslin
04th Dec 2014 10:57

I think it's nice that they made this change after buggering up LLPs.  Sure quite a few "human" LLP partners ended up making big capital gains following the corporate LLP tweaks last year.

So from the point of view, yes.

As stepurhan says, new businesses will still be's just one perk taken away from the "dabble as sole trader before incorporating" brigade.

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By HeavyMetalMike
04th Dec 2014 14:01

WHAT! I feel like crying. had a nice IFA client lined up to do this at March 2015. Oh well.

But all I need now is someone to sell me a company that was incorporated before yesterday and the rest can be "sorted"................Perhaps a mini industry can spring up of people selling dormant companies that were incorporated in Nov along with the (backdated) paperwork.

It'll be the new PPI advert?

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