Corporate distributions – changes are coming!

As you may be aware, the tax rate on monies extracted from a limited company currently ranges between 10% and 45%.

The rate depends upon how the monies are classified and under which tax regime the monies fall to be taxed – income tax or capital gains tax.

As the capital gains tax rate is usually lower than income tax, many individuals quite rightly arrange their affairs to receive a capital return rather than an income return.

Aware of this advantage, the Government launched a consultation, on the tax treatment of certain transactions, which ended on 3 February 2016.

The areas of focus include:

a.       The sale of companies with retained profits.

b.      Repayments of share capital and share premium.

c.       Purchase of a company’s own shares.

d.      Distributions in a winding up of a company.

We would expect that there would be an announcement at the 2016 Budget on 16 March 2016 in respect of the treatment going forward. Therefore, if you are able to take advantage of the current tax rules, you should try to do so.

If you wish to seek professional advice then speak to a member of our tax team today. For Darlington call Alan Moore, Lee Watson or Alison Welch (01325 349700), for Durham call Nicola Bellerby or Alison Welch (0191 384 2244) and for York call Alan Moore or Graham Richardson (01904 784400).