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What do the provisions in the draft Finance Bill 2016 concerning the tax position on distributions to shareholders in a members voluntary liquidation (MVL) mean for insolvency practitioners?
The government published draft tax legislation on 9 December 2015 for inclusion in the Finance Bill 2016. Consultation on the draft legislation will run until 3 February 2016.
It is proposed that for transactions entered into on or after 6 April 2016 a targeted anti-avoidance rule (TAAR) is to be introduced for companies. The measures being introduced are intended to restrict the opportunities for shareholders to convert to capital what might otherwise be paid as an income distribution (most commonly a dividend).
What does this mean for companies in an MVL?
This means that if the following conditions are met, an individual who benefits from a distribution of share capital from the liquidation of a company may be subject to income tax.
The conditions are:
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