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Any Answers Answered: BADR and a holding company

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TaxTV's Giles Mooney and Tim Good have picked a couple of questions from the pages of Any Answers to solve, this month focusing on a tricky query over business asset disposal relief and a holding company and another on quarterly instalments payments. 

3rd Nov 2023
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To view the full questions and AccountingWEB readers’ answers click on the links below.

Entrepreneur's relief and a holding company

The first question comes from AccountingWEB reader adamer who has an issue with entrepreneur's relief - or as it's now known business asset disposal relief (BADR). The reader explained: "A shareholder and director owns 33.3% of the shares in a trading company with a third-party limited company holding the other  66.7%.

"As dividend levels and timing are effectively controlled by the majority shareholder this means the minority shareholder may be impacted by higher rates of tax due to the timing of dividends. 

"He is therefore considering setting my a new company to hold the shares via a share-for-share exchange. This should mean that the minority shareholder can smooth out his income by holding the dividends in the new holdco or should he choose to make other investments."

Their concern is that should in the future he wishes to sell the shares in the trading company, presumably by selling the holdco, would be still be able to claim entreprenuer's relief as the new holdco may not be a trading company? Starting with that point, Mooney and Good discuss whether there is a problem selling a holding company of a trading company. 

CT quarterly instalments

The second questions concens quarterly instalment payments (QIPs). The user explained that the commencement rules for determination of liability to QIPs clearly states that they are effective for accounting periods beginning on or after first April 23.

They continued, "Since the reference in the regulations to associated companies does not take effect until first April 23, it follows that even if a company would have had sufficient numbers of associated companies at 31 March, they don't count because they cannot be recognised as such until 1 April. However, there is a considerable amount of commentary on various firms websites that does not agree." Good and Mooney answer the question by starting with an overview of the quarterly instalment regime. 

For the latest episode of TAXtv visit PTP Interactive.​ TAXtv is a monthly tax update programme available as an annual subscription (11 issues plus budget editions) to view online, download from the internet or watch on DVD.

Replies (2)

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By Ruddles
03rd Nov 2023 14:59

I obviously agree with the conclusion on QIPs, but not entirely with Tim's reasoning. He says that one needs only to consider the number of associated companies at any time in the accounting period in determining the QIP threshold. However, such consideration is relevant only for the small company tax rate. The legislation regarding QIPs remains unchanged in that it is the number of associated companies at the end of the preceding period that counts.

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By FactChecker
25th Nov 2023 19:21

Whilst Tim announces an incipient headache, the rest of us are provided with an exemplar of the benefits of CPD!

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