Closed a business? Don’t let HMRC catch you starting another one!
Closing a business ia all right with HMRC, but if you start another one like it you could be running foul of new legislation to prevent tax avoidance.
This method of avoiding tax is known as ‘phoenixing’: the process of extracting profits from a company, without payment of a revenue dividend, by way of liquidation and then establishing a new company in the same trade (the phoenix company).
In order to pre-empt the changes to the taxation treatment of winding up a company that were introduced in the 2016 Finance Bill, Q1 2016 saw a spike in the number of entrepreneurs voluntarily liquidating their businesses with the intention of later setting up a similar company.
thumbnail courtesy of bmmagazine.co.uk