UK and International Tax news
HMRC Issues Consultation On Company Distributions
Wednesday 30th December 2015
HMRC has recently issued a consultation document on the current tax rules governing distributions by a company and whether they can be improved in order to reduce imbalances in the tax system. The consultation covers the specific changes put forward in draft legislation that has been published in the 2016 Finance Bill and the distributions rules in general.
From April 2016, the way in which dividends and other company distributions are taxed will be fundamentally reformed for individual recipients. The changes will increase the incentive to arrange for returns from a company to be taxed as capital rather as than income, attracting tax at lower CGT rates, rather than the new dividend tax rates.
The government believes that it is unfair that some people can, in some cases, arrange their affairs solely to take advantage of lower tax rates. This consultation accompanies draft legislation designed to prevent tax advantages being obtained from specific types of behaviour. The proposed legislation would amend the Transactions in Securities legislation, which is designed to prevent unfair tax advantages in certain circumstances. The amendments would strengthen these rules, and clarify certain areas. The proposed legislation would also introduce a new Targeted Anti-Avoidance Rule, which would prevent some distributions in a winding-up being taxed as capital, where certain conditions are met and there is an intention to gain a tax advantage.
The consultation invites comments on what effect these changes might have and invites suggestions about how the problem might be addressed more widely.
The government also seeks views on whether respondents think that a more far reaching review of the distributions rules might be beneficial, and if so, what might be included.
The consultation and the new rules it discusses runs to 3 February 2016 and do not cover distributions received by companies.
If you would like more information on the condoc, please contact Keith Rushen on 0207 486 2378.
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