Planning for 2016

Steve ElliottPosted 16 December 2015 By Steve Elliott, Business Recovery and Insolvency Partner In Business Recovery & Insolvency

It’s the time of the year that we start looking forward and planning what we want 2016 to bring.

However, it’s now more important than ever for corporate clients to spend time considering their business structure, as changes to dividend tax taking place from 5th April mean that net income after tax could be affected.

Owners of limited companies who take a mix of salary and dividends will see the tax gap narrowed.  The 10% notional tax credit on dividends will come to an end and will be replaced by a tax free dividend allowance of £5,000.  Unfortunately, any dividends above this level subject to an increase in tax of 7.5% above the rate currently paid.

Those in two minds should also be aware that the Government has sharpened its focus on company distributions, announcing a consultation to crack down on practices where a tax advantage is obtained if an individual receives a capital return on their shares where they might otherwise have received an income. 

In short, the result could be a squeeze on Entrepreneurs’ Relief, which currently enables qualifying shareholders to take advantage of a 10% capital gains tax rate on funds distributed on the winding-up of the company.   

The tax tail should never wag the commercial dog, and it is difficult to second guess what the consultation (which had not been published at the time of authoring) may bring or when its findings will be implemented.  However, that could conceivably also be April 2016, and if there is already thought of an exit strategy for the company, then it would be wise to put the wheels in motion now.

Where the funds and assets in the company exceed £25,000, the appropriate exit route will be a Members’ Voluntary Liquidation.  The process must involve an Insolvency Practitioner, who needs a proven track record in working alongside existing accountants and advisors to ensure that shareholders receive the best, most cost effective outcome possible.

To discuss this or anything else contact Steve Elliott on 01793 818300 or send him an email.


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Dealing with day to day business is hard enough, but a HMRC investigation too? We simply don’t have the time, energy and expertise to handle that. I believe my accountant is certainly the best person to manage a tax investigation and it’s reassuring to know the costs will be covered.

Director, Small manufacturing company