Business tax savings not quite as attractive

16 March 2016

The chancellor was keen to level the playing field by ensuring that small businesses do not lose out because multi-nationals are not paying their 'fair' share of tax. But what about measures directed at those small businesses themselves?

The reduction of corporation tax – down to 17 per cent by 2020 – will be welcomed as will be the reduction of business rates. But what happens if the owner wants to get the money out?

Increases to dividend tax rates have already been announced and today we saw a corresponding increase when close companies make loans to shareholders. So from 6 April where a loan is made to shareholder the company will have to pay tax at 32.5 per cent on the amount advanced. This has been done to stop people taking money out as loans rather than dividends.

There is another sting in the tail. A lot of entrepreneurial companies will have historic employee benefit trust and other similar arrangements still in place. HMRC have been attacking these for many years but with limited success. Any loans from such structures – regardless of when they were taken out – which are still in existence at 5 April 2019 will attract a PAYE liability. Anybody who still has such a structure in place will need to take advice on whether to collapse the structure or to leave it in place.

If you would like to discuss how these announcements might affect you please contact Andrew Hubbard or your usual RSM contact.