Business Tax Insider: The Monthly Business Tax Newsletter

No rational individual would invest in a business in the hope or expectation of losing their money. However, despite the best of intentions, the business may still fail.

It might be possible to at least salvage some tax relief. For example, loss relief may be available for income tax purposes where the individual’s shares have become worthless, if certain conditions are satisfied, such as where enterprise investment relief is attributable to the shares, or where the shares are in a ‘qualifying trading company’ and have been subscribed for by the individual (ITA 2007, s 131). A claim would also be required that the value of the shares had become negligible for capital gains tax (CGT) purposes (under TCGA 1992, s 24). 

Mark McLaughlin warns that in some cases not only might a business investment be lost, but also any tax relief for the loss. 

This final article in a five-part series considers the double taxation problem on extraction, the wealth threshold at which family investment companies (FICs) make sense, and the long-term risks that every adviser must confront.

Nick Wright considers whether family investment companies deliver genuine tax efficiency over the full lifecycle. 

A company is a separate legal entity distinct from the shareholders who own it. This means that where a business is operated through a personal or family company, the profits must be extracted if they are to be used personally outside the company. 

There are various ways of extracting profits, including taking a salary and paying dividends. Here, we take a look at the tax implications of each.

However, it should be noted at the outset that these are not the only ways of extracting profits, and there is no ‘one-size-fits-all’. The optimal approach will depend on the individual’s personal circumstances.

Sarah Bradford looks at the merits of extracting profits from a personal or family company in the form of salary or dividends.

A company is a separate legal entity, distinct from the shareholders that own it. Consequently, if the directors and shareholders want to use the profits made by the company for their personal use, they will need to extract those profits first. There are various ways in which this can be done; some are more tax-efficient than others.  

Sarah Bradford considers options for extracting profits from a company in a tax-efficient manner in the 2024/25 tax year.

HMRC recently undertook a ‘One to Many’ letter campaign, wherein HMRC’s skilled data analysts undertake to mine nuggets from a huge range of sources to test for omissions or errors in tax returns. 

Lee Sharpe reports on HMRC getting all ‘Nancy Drew’ with its sleuthing over company reporting and shareholders’ dividend income returns.