Retirement Warning for Company Owners

Owners of companies who are thinking of retiring and unlocking the surplus assets in their companies through liquidation should start their planning now.

The Chancellor has advised that the Finance Bill 2016 will contain provisions which will, in many cases, impose an Income Tax charge on those seeking to use the liquidation route to realise assets in family companies. Such distributions are currently taxed as capital gains.

The charge will apply to 'close companies' (or those which have recently been close companies) where the trade is carried on afterwards in some form by the person receiving the distribution.

Also, for the charge to apply, tax avoidance must be one of the aims of the distribution.

The tax rates may run as high as 38 per cent, which contrasts badly with the 10 per cent tax rate available when Capital Gains Tax applies and 'entrepreneurs' relief' is claimed.

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Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.