Shareholder tax issues

By Tolley in association with Robert Langston of Saffery Champness
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The following Corporation Tax guidance note by Tolley in association with Robert Langston of Saffery Champness provides comprehensive and up to date tax information covering:

  • Shareholder tax issues
  • Transfer of assets abroad
  • Offshore funds
  • Tax rate on dividends received

This guidance note outlines how an international corporate structure can affect the tax position of UK resident individuals who are shareholders:

  • gains made in the corporate structure may be taxable on the shareholders personally – see the Gains attributable to participators in non-UK resident companies guidance note
  • income arising in the corporate structure may be taxable on the shareholders under the transfer of assets abroad rules
  • special rules apply to individuals holding shares in offshore funds
  • the location of the holding company will determine whether there is a tax credit available on dividends

In addition, certain reliefs such as under the EMI or EIS schemes require that the group carries on business in the UK. However, other reliefs, such as entrepreneurs’ relief, are available regardless of where the holding company is located, and regardless of where the group carries on business. See the Enterprise Investment Scheme (EIS) ― introduction, Enterprise Management Incentives (EMI) and Conditions for entrepreneurs’ relief guidance notes.

It is important to consider these issues when advising an international corporate group, as they will determine the after-tax return to the shareholders.

Similar rules may apply to shareholders resident in other countries, and these should also be considered. Local tax advice would be required for this purpose.

Transfer of assets abroad

The objective of these rules is to charge tax on income which has been transferred to a non-resident entity (including a company), and which would otherwise have been subject to tax in the hands of a UK resident individual.

These rules are complex and the points below are intended only to provide an overview. The legislation should be considered in detail whenever the rules are likely to be relevant.

ITA 2007, ss 714–751

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