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Thousands of UK Entrepreneurs Set to Liquidate Companies Ahead of Tax Rule Changes

Updated: 5th February 2020

Changes to tax rules are set to prompt thousands of directors around the UK to liquidate companies that they own in the coming months.

That’s according to numerous sources in professional services including accountants, advisers and business recovery experts.

The main cause for concern among many of the country’s entrepreneurs is that recently proposed and soon to be implemented tax rule changes will suddenly see them exposed to much higher rates of tax from April 6th 2016.

The new rules are expected to expose business owners to increased taxes on dividends with HM Revenues & Customs (HMRC) seen to be tightening laws relating to income-into-capital tax planning strategies.

It has been suggested that property developers and anyone who owns numerous different businesses will be among those most notably affected by the rule changes that were revealed in a consultation document published in December.

Anyone who falls into either of those categories could be in for a 'nasty shock' if they are not made aware of the rule changes before they come into effect, Timothy Fussell, head of business tax at the advisory firm Moore Stephens told the Financial Times recently.

However, many of those who do become aware of the incoming changes, which could soon see entrepreneurs exposed to tax rates as high as 38.1 per cent, are expected to take up the option of liquidating companies they own over the next few months.

Indeed, Andrew Tate, vice-president of the Business Recovery Professionals trade organisation, has said that he expects the tightening of tax laws in this context to result in a “great increase in liquidations” in early 2016.

Spokespersons for several organisations have suggested that the new rules will have consequences that are ultimately a concern for directors operating in the UK.

But HMRC has been keen to make clear that the intended aim of the rule changes is to incentivise entrepreneurs to arrange returns from their companies as capital rather than as income.

As well as a sharp rise in voluntary liquidation cases, HMRC’s rule changes are expected to result in an unusually high number of dividend payouts being initiated in the weeks and months prior to April 6th.

For more information on voluntary liquidation, known as an MVL process, click here for further reading on MVLs or contact Real Business Rescue for free, impartial advice about how to take the next step forward. With 78 offices across the UK, you’re never far away from expert and confidential advice.

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