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Spotlight 47 highlights tax avoidance schemes that try to avoid an income tax charge on distributions when winding up a company.
These schemes claim to circumvent the targeted anti-avoidance rule (TAAR) introduced in April 2016 to counter phoenixism (ITTOIA 2005 s 396B). They do this by making an artificial modification of the arrangements aimed at defeating the intention of the legislation – by selling the company to a third party rather than winding it up.
HMRC says it will investigate any attempts to avoid the income tax charge. If it is claimed that the phoenixism TAAR does not cover the arrangements the department will consider whether the general anti-abuse rule (GAAR) applies to the arrangement. Transactions after 14 September 2016 to which the GAAR applies will be subject to a 60% user penalty.
For transactions entered into on or after 16 November 2017 any person who enabled the use...
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