tax and jurisdiction
New rules that will hit capital gains tax relief on businesses being passed on as inheritance could prove an incentive for firms to move offshore.
On 6 April the Inland Revenue abolished tax relief on shares or business assets that are passed on to children by redefining what constitutes a trading company to exclude any firm with more than 20% non-business assets, such as property and shares.
The move has angered some in the business community and prompted fears that entrepreneurs may take their companies abroad to avoid capital gains tax.
Many may feel unfairly targeted after the phasing out of retirement relief, which provided tax relief on companies sold, left gifting their firms to family as the only means to receive capital gains tax relief.
The tightening of gifts relief was a natural progression from the phasing out of retirement relief, according to John Whiting, a tax partner at PricewaterhouseCoopers.
'The Inland Revenue is trying to emphasise that relief is available but for the right sort of businesses ' trading, not investment' he said.
Business people hoping to find a way around the stricter rules are likely to be disappointed, according to accountants, who say there is little they can do to minimise tax exposure because of the complexity and expense involved.
The Inland Revenue has defended its position by claiming that there is a growing incidence of businesses being set up with the sole intention of dodg- ing taxes.
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