If an investigation is opened on your tax return, it is advisable to gather as much information as possible to prove why the rule is not applicable. The rules also apply to cross-border companies where a non-resident company is being wound up. The purpose of this article is to briefly recall the TAAR rules and to highlight some practical considerations when advising in this area. This is not an exhaustive guide and the underlying legislation should be consulted for more information. Customers should be cautious when liquidating their business and resuming the same transaction in the next 2 years! And if dividend tax rates rise next year, this anti-avoidance law could become costly. TAAR stands for Targeted Anti-Avoidance Rule (TAAR). According to the 2016 Finance Act, the targeted anti-avoidance rule is a rule introduced to combat individuals who mistakenly reduce their tax liabilities by converting dividends into capital payments by winding up their business. The rules apply primarily to distributions made to an individual upon dissolution of the Corporation on or after April 6, 2016. Under this rule, individuals are valued on the basis of certain conditions, if met, distributions are subject to dividend tax as opposed to capital gains tax (CGT). This rule prevents individuals from phoenix their businesses by conducting their business. The main purpose of this rule is to identify people who are following the wrong procedure to avoid or minimize taxes by dissolving their businesses. Fred`s company, Fred Ltd, will be linked to IR35 from 6 April 2021 under new private sector rules regarding its involvement in Lewis Group. They agreed that he would join the Lewis Group as an effective employee from 6 April 2021.

The ARAR is the relatively new tax rule that may apply to treat proceeds received by a taxpayer on winding up a business as „income“ rather than „capital“ for tax purposes. Therefore, it is important for well-meaning business leaders to familiarize themselves with the legislation so as not to accidentally break the rule. A liquidation distribution made to an individual on or after April 6, 2016 is treated as a distribution when certain conditions are met. For the rule to apply, all of the following conditions must be met: The two conditions mentioned in point 2 where taxpayers generally need help before risking making DIY decisions regarding their exposure to this rule are: May I now get back to basics and take a closer look at the impact of this anti-avoidance legislation? If there is real uncertainty about the applicability of the RBAT, taxpayers should consider disclosing „white space“ in their self-assessment return – although, given the complexity of the rules, it may be difficult to limit a return to the space available. After giving a webinar on taxation, delegates often send me emails with their recent tax experiences, and several accountants have recently contacted me to explain that they have attacked HMRC clients under the relatively new anti-avoidance legislation of the CGT TAAR. If you have any questions about the Targeted Anti-Avoidance Rule (RBAT) and its terms, please contact DNS at 03300886686 or email us at info@dnsassociates.co.uk If you are not sure if these rules could affect you, our insolvency experts will advise you free of charge. Simply call 0161 907 4044 or email [email protected]. It should be noted that the budget increased tax rates on dividend income.

Currently, the ordinary rate, the top rate and the additional rate are 7.5%, 32.5% and 38.1% respectively. This measure increases each rate from 1.25% to 8.75%, 33.75% and 39.35% as of April 2022. This will have a big impact when HMRC enforces TAAR anti-tax avoidance legislation from 6 April 2022! A voluntary liquidation of members („VL“) can be a tax-efficient method for directors and shareholders to liquidate their business and release assets, especially if they plan to retire. However, there are some caveats that entrepreneurs and their advisors should be aware of, especially if an MVL is being considered for purposes other than retirement and a new business is being considered. This is significantly less than the amount of income tax you would otherwise be charged, which ranges from 20% for the base amount to 45% for the higher rate. HMRC`s guidance (taken from CTM36300 of the Business Taxation Handbook) is very limited and contains only a few examples illustrating the practical application of the TAAR.