To Prevent HMRC imposing additional tax and cost burdens on very small businesses

Responsible department: Her Majesty's Treasury

Under proposals made today HMRC are proposing to prevent small businesses using long-standing provisions of the Companies Acts to extract their capital on retirement if it exceeds £25,000 and imposing an income tax liability on the excess unless they incur the needless expense of a liquidator which HMRC estimates at £7,500. This deprives small business men and women who retire of the right to use entrepreneurs' relief - the measure is allegedly to prevent avoidance/evasion (!) of liability but HMRC themselves acknowledge that it will have a negligible effect on tax receipts over the next 5 years. This measure should be dropped as existing anti-avoidance provisions are adequate to prevent avoidance.