Devising the best structure for you to own your business/investments

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With proposed changes to both the dividends tax regime and the operation of tax relief on interest payments relating to residential property investments, now is the time to consider your options with
regards the business/investment ownership structure.

Dividends Tax Changes

As referred to in 1 (above), from April 2016 a new regime for charging income tax on dividends will apply, which in most cases will result in an effective tax increase for owner managed businesses who remunerate themselves via significant dividends.

As part of considering your remuneration policy for 2016/17 it is also worth considering whether or not now is a good time to restructure the ownership of your business.

Perhaps it is time to bring family members in as shareholders, or increase already existing holdings as part of a family succession plan. You may consider now is a good time to look at employee share ownership as part of a transition of ownership to the future owners of the business.

We can assist you to restructure the ownership of your business in a tax efficient manner whilst also meeting your commercial objectives.

Incorporation

If you currently operate your business via a partnership or as a sole trader, despite the proposed changes to the dividends regime their may still be savings achievable by incorporating your business.

Your particular circumstances will dictate whether this course of action is preferable and we would need to take account of the levels of profits, the desired ownership structure and the potential owners other income streams.

Of course, incorporation may not suit all circumstances, and the ‘IR35’ rules specifically counter the use of ‘personal service companies’ to reduce tax, but we will be pleased to discuss how incorporation might apply to you and your business.

Residential Property Investment

From April 2017 higher and additional rate tax relief on interest payments relating to borrowings used to acquire residential property investments will be phased out.

Instead a new regime restricting the income tax relief to the basic rate will apply. This new regime is complex and the mechanics of it will result in significant tax increases on rental profits arising from the letting of residential properties.

As such, now is a good time to review your residential property investment portfolio and ascertain whether the ownership structure is still the correct method for you. Amongst the possibilities we can consider are the use of a corporate vehicle for current or future property investments and bringing in family members as part owners.

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