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Greene & Greene is a long established firm of solicitors based in Bury St Edmunds, Suffolk. Our lawyers advise individuals and businesses based all over the UK.

We regularly attract new clients who have been using firms in London, but now receive a more cost efficient and more personal service from us here in Bury St Edmunds.

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Entries in Tax (5)

Friday
Dec072018

Entrepreneurs’ relief......time to say goodbye?

In his Budget speech on 29 October, the Chancellor provided reassurance to many investors’ concerns regarding the Government’s view of the capital gain tax (“CGT”) relief for entrepreneurs (Entrepreneurs’ relief, “ER”)), when he stated the following:

“I have received representations that I should abolish Entrepreneur’s Relief……and put the savings towards funding our NHS commitments……

[However] I will retain the Entrepreneurs Relief……but to ensure it is going to genuine entrepreneurs I will extend the minimum qualifying period from 12 months to 2 years”.

However, Mr Hammond unsurprisingly failed to mention the biggest change to ER, which was published in new draft legislation shortly after the end of his speech.

What is ER?

Entrepreneurs’ relief is a valuable tax relief for individuals as it operates a CGT rate of 10% on qualifying gains arising from a qualifying disposal of assets or shares, up to a lifetime limit which is currently set at £10 million.  In the absence of ER, gains are taxed at 10% to the extent that the individual’s taxable income for the year falls below the basic rate band upper limit (currently £46,350) and 20% on the balance. 

Before the announcements made in the Budget, in order for an individual to be able to claim ER in respect of a disposal of shares, he or she must have throughout the period of one year ending with date of disposal of his or her shares:

  • hold at least 5% of the company’s ordinary share capital;
  • and that by virtue of that shareholding, carry at least 5% of the voting rights in the company; and
  • be a director or employee of the company.                 

The company in question must be a trading company or the holding company of a trading group.

New tests

Since 29 October 2018, individuals must also satisfy that, by virtue of his or her 5% holding in the share capital in the company, throughout the period ending with the date of the share disposal:

  • that he or she is beneficially entitled to at least 5% of the profits available for distribution to equity holders; and
  • that he or she would be beneficially entitled to, on a winding up, at least 5% of the assets of the company available for distribution to equity holders.              

From 6 April 2019, the qualifying period in which all conditions for ER must be satisfied is to be increased from one to two years.

The use of “Equity holders” in the new tests rather than shareholders widens the scope of the test to include the rights of loan creditors in respect of any redeemable loan capital issued by the company or any debt incurred (other than a normal commercial loan).  We do not have any clarity on what “beneficially entitled” means in this context.

These two new tests are meant to reflect the Government’s view that ER should only be available to those with at least 5% of the economic ownership of a company. 

However, the reality of complex share structures in place to provide different classes of investors with their agreed commercial return means that many may be prevented from claiming ER despite being key shareholders in a company.  Sadly, the lack of clarity in the new legislation means that it is unclear for many as to whether they will be denied a future claim for ER.

For example, a company with a share capital including preference shares will need to review the rights attaching to those shares, as a preference to a fixed percentage of dividends and capital on a winding up of the company may now prevent other shareholders from being able to qualify for ER under the new tests.

Why don’t you contact us? We are recommending to clients who hold a shareholding in a company with more than one share class (and have always expected to be entitled to ER on an exit), to review the rights attaching to different classes of shares, to ensure that there are no nasty surprises when claiming ER in respect of a share disposal.

If you do have any concerns regarding the availability of ER, then please do not hesitate to contact Natalie Stoter in the company commercial team on nataliestoter@greene-greene.com or 01284 717462. For more information on the services offered by Greene & Greene Solicitors please visit www.greene-greene.com and follow on Twitter @GreeneGreeneLaw.

Tuesday
Nov282017

Budget 2017: Mr Hammond’s SDLT giveaway for first-time buyers

 

First-time buyers struggling to obtain a foothold on the housing ladder will be overjoyed by the Chancellor’s announcement in the Autumn Budget of a new Stamp Duty Land Tax (“SDLT”) holiday on first-time purchases.

The Government has recognised that house prices in certain regions in the UK, particularly London and sought after towns such as Bury St Edmunds, are at a level, which prevents many first-time buyers from being able to consider purchasing their own home.  The SDLT cost along with a deposit and conveyancing fees present too much of an upfront cash burden for many, causing the membership of “Generation Rent” to be ever increasing.

The relief is available to purchases below £500,000: SDLT is abolished for first-time purchasers up to and including £300,000, and above £300,000 to £500,000 the rate of SDLT is 5%.  The standard SDLT residential rates apply to purchases above £500,000.

The purchaser, or if more than one, purchasers, must all be first-time buyers and must intend to occupy the property as an only or main residence.  Being a first-time buyer means that an individual has not owned a “major interest” (i.e. a freehold or long leasehold interest) anywhere in the world.  So if a purchaser already owns a property in France, for example, they will not be regarded as a first-time buyer in the UK.

The Treasury’s own assessment is that following the introduction of this measure, 80% of first-time buyers will pay no SDLT at all on a first-time purchase and that at least 95% of first-time buyers that pay SDLT will benefit.

Time will only tell if this measure is a success or not.  Critics of the measure believe that it is of little benefit to first-time buyers (being worth c. £1,660 to someone buying the average first-time property), and that a wider reduction in SDLT rates would be more effective to help the entire UK property market, by encouraging transactions across the board. 

If you require any advice regarding SDLT then please contact our specialist tax solicitor Natalie Stoter please contact Natalie Stoter on nataliestoter@greene-greene.com or 01284 717462 (Direct). For more information on the services offered by Greene & Greene Solicitors please visit www.greene-greene.com and follow on Twitter @GreeneGreeneLaw

Wednesday
Sep062017

Taxing times...

Anyone looking to invest in property as either a second home or a buy-to-let since 1 April 2016 will no doubt be aware of the additional 3% Stamp Duty Land Tax ("SDLT") rate on the purchase of an additional dwelling.  However, SDLT is not quite all doom and gloom, as there are situations when the additional rates will not apply, and reliefs are available in certain circumstances which can reduce your SDLT bill with HMRC.

For example, if a buyer is looking to acquire two or more dwellings in a single transaction, then “multiple dwellings relief” may be available to reduce the overall SDLT liability.

Rather than applying to all “properties”, the additional rate is levied on the purchase of a “dwelling”.  What the man on the Clapham Omnibus would regard as a “dwelling” is not the same as HMRC, and often an analysis needs to be carried out in order to make a determination.

Also, the additional rates are only applicable when a buyer is not replacing his or her main residence. HMRC takes "replacing" to mean that there has been a disposal and acquisition.  Therefore, where a buyer acquires a new main home, but has not disposed of their previous residence, he or she will be initially caught by the additional 3% rate.  However a refund for the additional tax paid can be claimed from HMRC if the previous main home is sold within a three year window. 

If you have any questions in relation to SDLT, please contact Natalie Stoter on nataliestoter@greene-greene.com or 01284 717462 (Direct). For more information on the services offered by Greene & Greene Solicitors please visit www.greene-greene.com and follow on Twitter @GreeneGreeneLaw

This article first appeared in Issue Five 2017 of Bedfords Review

Monday
Aug012016

Estate Planning Workshops 2016

Greene & Greene regularly hosts a series of workshops and seminars on current legal issues. These always prove popular with clients and fellow professionals. The seminars are free to those who have registered their places in advance.

This year we will be presenting the following Estate Planning Workshops:

  1. Tax and Residential Property – Downsizing, Surcharges, What Next? – Tuesday, 13 September 2016 at 8:00am (Denny Brothers’ Conference Rooms, Kempson Way, Bury St Edmunds)

    Wayne Perrin (Private Client) and Jonathan Mathers (Agricultural and Residential Property) will look at the broad range of taxes from a residential property perspective including:

    • Inheritance Tax - the residential nil rate band and the downsizing proposals one year on; are we any clearer?
    • Capital Gains Tax – how the new rules (do not) affect residential property;
    • Income Tax – the changes in the deductibility of mortgage interest; and
    • Stamp Duty Land Tax – the new surcharge rules; when they apply and when they do not.
  2. Whose Will is it Anyway? – Tuesday, 18 October 2016 at 8:00am (Denny Brothers’ Conference Rooms, Kempson Way, Bury St Edmunds)

    Introduced by Wayne Perrin (Private Client) and with the main session including Kate Chandler (Contentious Trusts and Probate), Martine Swaep (Private Client), and Ben Fox (Contentious Trusts and Probate).

    The decision in Ilott v Mitson (currently referred to the Supreme Court) brought into the public eye the ability to “interfere” with a person’s Will. This caused a large degree of consternation in the English media, with some commentators even expressing the view that there was no longer any point in preparing a Will. In this session attendees will be given the chance to sit in judgment on a (fictional) disputed Will case. This promises to be a lively and entertaining debate.

    For further information on the above estate planning workshops, please click here.

Wednesday
May042016

Business Workshop in Bury St Edmunds

On Thursday 19 May we will be jointly hosting a free workshop in Bury St Edmunds with business consultancy Business Doctors and Larking Gowen Chartered Accountants for owners of SMEs, focussing on how owners can save time and increase the value of their business by reviewing their management strategy.

As part of the workshop, Andrew Cooper, a partner in our Corporate & Commercial team, will be giving a presentation on the importance for SMEs of putting in place the correct legal documents and framework.  Andrew will explain how the right legal structures can improve efficiency and increase the value of your business.

Further details of the workshop, and on how to book a place, can be found here.

Contact Andrew Cooper for Corporate & Commercial advice on 01284 717511 or email andrewcooper@greene-greene.com.  Follow Greene & Greene on Twitter @greenegreenelaw or LinkedIn (www.linkedin.com/company/greene-&-greene).