The 2012 tax year began on 1 April 2011 for most taxpayers and with it new tax rules in relation depreciation on buildings and LAQCs finally came into force. We have written a number of times on the potential impact these rules may have on you if you have an existing LAQC and have long been encouraging our clients to make contact with us in order to have their circumstances reviewed so that appropriate action can be taken.
By way of summary, the key changes are as follows:
- Tax losses of an LAQC can no longer be attributed to shareholders. This means if you have a loss making LAQC from the 2012 year onwards you will no longer be able to personally claim the tax losses produced by the LAQC. If you are in this situation you need to take action.
- Whilst LAQCs can continue to exist without the ability to attribute losses, no new companies can enter the LAQC or QC regime.
- In what can be regarded as a replacement of the LAQC regime the new Look Through Company (LTC) regime has been enacted. An LTC is perhaps best described as a “cousin” of an LAQC.
- LTCs share some characteristics of the old LAQC regime in that tax losses can be attributed to shareholders and capital gains can be released from an LTC.
- However, there are some significant differences including the fact that there are rules that effectively limit the amount of loss that shareholders can claim, profits are also attributed to shareholders rather than being regarded as company profits, shareholder salaries can not be paid from LTCs, and shareholders are regarded as owning the underlying assets for tax purposes, which means when you sell shares in an LTC you are regarded as selling the property which can have income tax implications for you if the LTC owns property that is on revenue account or depreciable property.
There are a variety of options available to those who have LAQCs and we also see the new LTC rules as offering opportunities for clients with existing companies and offshore operations in certain circumstances. Please contact us at GRA for a meeting to discuss the potential opportunities that the new LTC regime presents.