Planning to leave, Loans to report on P11D, Rent-a-room relief

Some of your clients may be deeply affected by the result of EU referendum, and are looking for advice on how close or move their business interests in order to leave the UK. We have some practical tips on planning for such a move. We also look at which directors' loans to report on the P11D form. Finally, HMRC has updated its guidance on rent-a-room relief, we highlight the key points.

This is an extract from our topical tax tips newsletter dated 30 June 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Planning to leave 
Selling or moving a business is not a simple as moving home. It needs to be planned carefully, with as much notice as possible. The first thing to clarify is: how strongly is the business connected with the individual owner. 

If the business is essentially the individual trading on their own account as a sole-trader or company, then it may not be possible to sell the business without the current owner's continued involvement. In that case the only solution may be to wind-down the business and extract the cash in a tax-efficient manner. 

Pension contributions can be used to do this, as withdrawals from a pension fund can now be made from age 55. However, if the cash is required quickly locking value into a pension fund may not be advisable. The taxpayer should always take independent financial advice before making a large pension contribution. 

If the business is to be sold for a significant profit, check whether the conditions for entrepreneurs' relief will be met for at least 12 months ending with the date of sale. Where owner's the spouse or civil partner holds less than 5% of the ordinary share capital, a transfer of shares between the spouses/partners may allow two people to claim entrepreneurs' relief up to the maximum lifetime limit of £10 million.      

The levels of unutilised cash and investment assets held within the company should be reviewed. Where the cash has not been ear-marked for a business purpose (even paying a dividend), HMRC could regard it as a non-trading asset, which could scupper a claim for entrepreneurs' relief. 

Every business will need a different exit plan. Our tax experts are happy to cast a second eye over your client's plans, to check for possible problems.    

This is an extract from our topical tax tips newsletter dated 30 June 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>> 
 
The full newsletter contained links to related source material for this story and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>