Institutes demand simple route to disincorporation

Link: Budget fears end rush for incorporation

Uncertainty surrounding paragraph 591 of the pre-Budget report, which promises to clamp down on the tax affairs of small companies, has led to unanimous calls from the profession for a relaxation of capital gains tax liabilities on ‘disincorporation’.

‘Many businesses are discovering they are inappropriately structured,’ reads the ACCA’s 2004 Budget representation. ‘There seems to be no reason whatsoever why a proper and fair route to tax-free disincorporation cannot now be introduced.’

Many small businesses incorporated after Gordon Brown introduced a zero-rate tax on companies with profits below £10,000 in his 2002 Budget. Hundreds of thousands of firms have since incorporated, but could face the removal of incentives while still facing the burdens of being a company.

Frank Haskew, head of the tax faculty at the ICAEW, said the institute would be calling for ‘disincorporation reliefs’ in its Budget representation.

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