Plan Your Financial Wealth

Entrepreneurs’ Relief was introduced after the abolition of capital gains tax taper relief scheme in April 2008. At that time, the Government plans to a uniform rate of 18% to be imposed on all capital gains, corporate and non-business assets. However, after a period of lobbying from industry, government support (or rather listening) to their original decision?.

Well, the company revealed that 18% of the levels 80% compared with 10% rate applied to old assets that are held for a specified number of years. Entrepreneurs’ Relief was introduced with the average price of 10% on all qualifying corporate profits to £ 1m. After the budget of March 2010, a lifetime allowance doubled to € 2 million (and up to £ 5,000,000 by George Osborne in the Emergency Budget on June 22, 2010 – exact date not yet announced the execution). exemption can be claimed multiple times to limit the sale of businesses and can be applied to the entire company or a portion thereof.

To qualify for entrepreneurs’ relief, you must meet certain criteria:

- Business must meet the definition of a trading company, which does not have to “do to a significant level of activities other than trading”

- It’s called the test “20%, 20% is a measure of non-commercial activities of the maximum that can be ignored because of the Entrepreneurs’ Relief

- Shares must be in “individual private enterprise.” In other words, you must hold at least 5% of the issued ordinary shares (which will get you up to 5% of voting rights)

- You need an officer or employee of the company

A possible pitfalls that could cause someone to lose the relief, if they hold too much money in the company. As an example, let’s say that at the time of the dissolution / sale of the business value of its net assets is £ 3m. At that time the company no longer trading, the company £ 750,000. There was one owner who has a 100% holding of ordinary shares whose voting rights.

Only £ 120,000 of this amount is used for business purposes. Surplus of £ 630,000 in cash for 21% of its net assets, net fixed assets with the same broad assumptions. As this example does not pass the test “20%”, the possibility that the conditions are not met to qualify for this assistance. Calculation of capital gains will be (assuming the shares originally acquired by a nominal amount):

Gain 2010/11 – £ 3m

Annual Exemption – £ 10,100

Taxable income – £ 2,989,900

CGT – £ 538,182 (18%)

Effective tax rate – 17.94%

Net income – £ 2,461,818

One possible solution

One idea is for companies to contribute to the pension scheme on behalf of the shareholders of 100% (owner).

For example, if the company £ 100,000 to contribute to the pension scheme more than one year before the end of the business, the situation looks

- While a 28% tax credit for company pension contributions, which would reduce net assets £ 72,000 (£ 100,000 x 28% = £ 28,000 received. £ 100,000 – £ 28,000 = £ 72,000)

- Corporate tax relief is available provided the contributions are made ‘wholly and exclusively “for business purposes

- The impact of pension contributions is that the net assets of the company will be £ 72,000, to £ 2,928,000

- The result is that the level of cash surplus of the company will reduce to £ 558,000 (£ 630,000 – £ 72,000), less than 20% of net assets (£ 558,000 / £ 2,928,000 x 100% = 19, 06%)

- Whilst there remains at least one year before the date of the company’s operations to cease, will Entrepreneurs’ Relief is available

Let us now look at the calculation:

Gain 2010/11 – £ 2,928,000

Entrepreneurs’ Relief (4 / 9 x £ 2,928,000) – 1301333 GBP

Profit after exemption – £ 1,626,667

Annual Exemption – £ 10,100

Taxable income – £ 1,616,657

CGT – £ 290,982 (18%)

Effective tax rate – 9.94%

Net income – £ 2,637,018

For this example, I have assumed that the relevant income of entrepreneurs under £ 130,000 for two years in a row and taxes. This is the holding is not limited by the amount of pension that the owner because of the action, while making the anti-empting that apply in the case of contributions to pension plans for high-income.

The Bottom Line Financial Tips

Entrepreneurs’ Relief is a valuable benefit that a substantial amount of tax savings, provided you qualify. Pension options worth considering, but make sure that your professional adviser before taking any action.

ACTION POINT

If you’re within a few years considering the sale of your business, talk to your accountant now to ensure that the problem you are prepared in a way that you would cenderung to memenuhi secara penuh requirements Pengusaha ‘Relief.