The Budget has received its first vote of acceptance in the Commons this week. Albeit, with the withdrawal of cuts to disabled benefits. No doubt Mr Osborne and his Treasury mandarins will turn their mind to the £4bn short fall this will leave?
Most practitioners’ clients will welcome the reduction in CGT rates and the extension of Entrepreneurs’ relief to long term business investors in small companies.
However, the rental sector continues to take increases in its tax charges. The reduction in the CGT rates do not apply to a landlord that disposes of buy-to-let property and make a chargeable gain.
Clients will no doubt be looking for magic bullets to reduce the impact of the new dividends tax regime, and will want to know if it still advantageous to be incorporated? Much of the gold-standard tax strategies are up for review post April 2016.
But doesn’t this offer tax practitioners an opportunity. Maybe 2016 will be the year that new ideas will emerge? At least it may do if the statutory goals do not shift in the interim, fingers crossed.
Areas that are possibly up for review could include:
- Revisiting dividend, salary or other extraction methods for shareholder directors of small companies.
- What are we to make of the possible sole trader limited liability status?
- Avoiding income distributions on winding up.
- Dealing with gearing issues as landlords start to feel the impact of the gradual reduction in higher rate tax reliefs on mortgage interest from April 2017.
- Disincorporation – if director shareholders spend everything they make, no retained profits, would they be better off as self-employed?
- Is money boxing going to be penalised in the future, the OTS have indicated they are in favour of a “look-through” approach for smaller companies, i.e. trading profits will taxed as if they were the earnings of shareholders.
And if George Osborne does figure out how to fill his £4bn funding gap, perhaps he will turn his attention to smaller business or higher rate tax payers to do this? We live in turbulent times.