Trusts legislation amendment is still unclear
Amendment to trusts legislation still leaves advisers in the dark
Attempts by the Treasury to clarify trusts legislation has left the door open
to more confusion for tax advisers handling unquoted private companies.
Paymaster general Dawn Primarolo has stated that an omission in the Finance
Act 2006 on the taxable element of share buybacks – which created the
possibility of an income tax bill on both the original subscription price and
distribution element – would be amended in the Finance Bill 2007. It would be
backdated for a year to bring the tax position to where it was meant to be in
the first place.
However, Mike Warburton, senior tax partner at Grant Thornton, warned that
the amendment had failed to clarify how this would affect the rules where the
buyback was classed as liable to capital gains tax and if taper relief was
available; or whether income tax would have to be paid.
‘It’s legislation without proper thought, and they haven’t gone as far as
they should have,’ said Warburton.