Have you got surplus cash in your Company? Retained profits in the company have been “sheltered” at only 20% tax. As the corporation tax falls over the next few years some companies may find their cash surpluses increasing

Will the build up of cash cause a problem?

To the extent that cash surpluses exceed the amounts reasonably required for the purposes of the business it may be regarded as an “excepted asset” for business property relief under inheritance tax.

Entrepreneurs’ Relief may also be challenged where a company’s activities to a substantial extent include non trading activities.

Entrepreneurs’ relief may further be challenged by proposed changes in the Finance Bill 2016 where HMRC would like to tax the distributions on winding up of a company as income rather that capital when certain conditions are met i.e. your tax bill is potentially likely to be a lot higher!!

The conditions are generally where a private company is wound up and within 2 years, the individual who received the capital distribution, is involved with carrying on a similar trade or activity, then the distribution may be treated as income if the main purpose of the arrangement was to avoid income tax.

So it is very important when you close your company that you consider any possible risk of an attack from HMRC.

It is always important before you take any action that you obtain professional advice. If you have any questions in respect of the above, then please do not hesitate to contact our tax experts by sending an email to kevin@kwaccounting.com