There are five secret questions you need to ask yourself before the holiday is over.
Ola Sulaimon of Ronzl Accountants shares some timely advice.
THE holiday I am referring to in this title is tax holiday or relief for businesses that are run through companies and their shareholders wanting to dissolve it to a sole trading business. This relief is referred to as disincorporation relief; it was first introduced on 1 April 2013 and ends March 2018.
Disincorporation relief allows a company to transfer its qualifying assets, which are goodwill and properties (as long as they are stock), to its shareholders without incurring a corporation tax on the disposal of the asset.
Before this relief came into place in 2013, whenever shareholders dissolved their limited company and transferred their business to themselves, it would be assumed that the business (assets) are sold to the shareholders and the shareholders would have to pay corporation tax on the profit from sale.
HMRC put this relief in place to encourage business people that felt trapped in running their business because of the corporation tax they would have to pay when the company was dis-incorporated. This is because it's usually the same person involved and no actual transfer of cash was made. To enjoy this relief, you must ask yourself the following questions:
* Will the business be transferred as a going concern?
* Will all the business assets (except cash) be transferred?
* Does the total market value of qualifying asset exceed £100,000?
* Will the business be transferred to the shareholder who are individuals rather than corporate bodies?
* Has each shareholder held the shares throughout twelve months before the transfer was made?
If your answers to the above questions are yes; then the shareholder and the company can make joint claim to HMRC within two years after the transfer date.
HMRC's main concerns are that most business owners are not making this claim, which might be because they are not aware of the relief or they can't be bothered to disincorporate their business.
Are you one of the business owners that do not know about this relief or are not sure? My advice is to take action before the holiday is over.
To find out more contact Ronzl Accountants Ltd, 51 Billing Road, Northampton. Call 01604 965826 or see the website at www.ronzlaccountants.co.uk