Limited liability companies in the UK may be granted capital gains tax relief if they transfer control of trading to a company employee. The plans announced on 10th December 2013, will allow free income tax discounts of up to £3,600 to employees that have indirect ownership in a LLC.
The Capital Gains Tax Committee has welcomed the Treasury´s decision to introduce to the law. The generous income tax exemption can be treated as a bonus to employees and free up funds to invest in other areas of your business. It should be noted however that National Insurance Contributions (NICs) will be payable on bonus payments.
The proposed tax rules are designed to encourage companies to offer employee ownership as part of their bonus scheme in order to generate more employee involvement to help grow your business. The new law embraces the concept of engaging your entire workforce to improve the day to day running of your business and engaging employees so that they are more committed to achieving the ultimate company goal.
HMRC to clamp down on employee tax fraud
The capital gains tax relief will also come with tighter constraints that will allow HMRC to identify companies attempting to claim for employee tax relief fraudulently. The crackdown will address attempts to avoid paying tax liabilities by offering false arrangements of intermediary employment.
Intermediary employment contracts allow employers to avoid paying National Insurance contributions of 13.8% which factors in PAYE deductions, holiday pay, sick pay and pension contributions or redundancy.
However, it has been found that companies in several key sectors have been abused the self-employment test in order to reclaim refunds on their tax liabilities. It is often the case that employees are unaware of the nature of the contract they have entered into, but as such are considered self-employed and are liable for tax bills they do not know exist.
It is likely legislation will be updated to class intermediary employees in the same way as a direct employee of the company providing the following conditions are met:
- he or she is subject to control, supervision or direction
- if services are provided personally;
- if remuneration is a consequence of providing services
- and if remuneration received is not taxed already as employment income.
The Government is proposing a nine week consultation to discuss what effect the introduction of new clauses will have on the administration of companies and government offices. The Government believes this is the next step to ´creating a level playing field´ and preventing unruly business owners from obtaining a financial advantage fraudulently.
If you would like advise about how the new capital gains tax relief for employees with benefit your company and what you need to do to avoid punishment by HMRC give Taxaccolega a call today on 08000 235 234 or email firstname.lastname@example.org. You should also be aware that if you complete the tax form out incorrectly you will be subject to a £100 penalty.