As has been widely commented on in all media, the CGT rate is to be “simplified” at 18% for disposals after 5th April 2008. You may think that this is a win as gains are currently taxed at 40%. However, this is not the case. Currently, what is known as business asset taper relief is available on the disposal of business assets, which leaves any capital gain arising only liable to 10% tax after 2 year’s of ownership. This relief will be abolished after 5 April 2008.
How does this affect you?
Your company is a trading company for tax purposes and therefore your shares are a business asset. If you have owned those shares for 2 years or more prior to disposing of them then any gain you make is only subject to 10% tax - provided the disposal takes place on or before 5th April 2008.
The important thing for you is that if you close your company down by way of a solvent liquidation, that is a disposal for tax purposes and any assets in the company distributed to you by the liquidator will be treated as capital and only subject to the 10% tax charge.
This will be of particular relevance to you if:
- Your current contract is due to come to an end before 5th April 2008 and
- You have a reasonable amount retained in the company
There are many other planning points to consider. These include for example considering gifting some shares to your spouse so that you can both use the annual CGT exemption available - £9,200 each.
Obviously if you close your company you will need to work in a different way in future and JSA can provide an alternative solution to facilitate this.
Please note that this type of tax planning advice is not part of JSA’s standard fee arrangement with you and will be subject to separate additional charges for advice given and work carried out.
If you are interested in receiving further guidance and advice on your own circumstances please contact us directly on clientsupport@jsagroup.co.uk
Professional advice should be obtained before acting on any information contained herein and therefore no responsibility can be accepted for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents hereof.