Hello
The tribunals are back for a new term and we have some fascinating tax tales to share with you this week.
If you act for any family companies you might be interested in considering the CGT planning in the Olivia Wilkinson case below. Taking advantage of the rules as they stand, a company owner gifted some shares to his daughters, before selling his company to a third party to allow them to claim Entrepreneurs' Relief (the relief subsequently renamed, 'Business Asset Disposal Relief'). The twist in the tale was that the only way they could qualify was via a share-for-share exchange, and becoming shareholders in the buyer. HMRC tried (unsuccessfully) to block this arrangement.
Of course, there is a much simpler route and that is to give potentially BADR-qualifying shares (and directorships if they are not employees) to your children earlier on in life, and they might sell with you on a takeover. You do then run the risk that the children might vote against you and so you can see why it might not always be a good idea.
We also have an Upper Tribunal decision on the deemed employee rules for Limited Liability Partnerships (LLPs) which is one to note, being a decision that sets the law. We also feature a case confirming the extended time limits for Discovery Assessment in relation to certain offshore matters.
Following the announcement that the government is changing its Net Zero targets, I have also included a little piece on a Private Members Bill, the Local Electricity (No. 2) Bill, which aims to pave the way for small generators of low-carbon energy to sell their energy locally and to sell power back to the grid. This is an idea that comes up time and time again in every community. It’s technically challenging to those in charge of the national grid, although anyone who has PV panels connected to the grid under the different feed-in tariff arrangements knows that that system allows us to generate and send power back without any outage issues. One wonders if the reasons for not supporting local electricity are merely political.
Back soon,
Nichola Ross Martin FCA CTA (Fellow)
Tax Director
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In Olivia Wilkinson and others v HMRC [2023] TC 08887, the First Tier Tribunal (FTT) decided that HMRC was not able to deny Capital Gains Tax (CGT) relief on a share-for-share exchange that subsequently allowed the daughters of a company's owner to claim Entrepreneurs' Relief (ER) relief after a take-over. The CGT planning exercise was not one of the main purposes, nor the main purpose, of the deal.
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Nichola's SME Tax W-update 14 September 2023
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