The UK’s first female Chancellor, Rachel Reeves, has announced the first Labour budget in 14 years.
In this blog, our Insolvency and Restructuring Solicitors highlight the main changes which are likely to have an impact on the Insolvency & Restructuring market.
A members’ voluntary liquidation (MVL) is a process used to wind up a solvent company in the UK. In this process, the members (also known as shareholders) decide to liquidate the company voluntarily.
This typically happens when the company has fulfilled its purpose and has no further need to operate but still has assets that can be distributed to shareholders.
MVLs are often used when the business owners wish to retire and have not been able to sell the business as a going concern.
One key advantage of an MVL is that distributions to shareholders are taxed under Capital Gains Tax (CGT) rather than income tax.
In the Autumn Budget, the Chancellor announced that the lower rate of CGT will increase from 10% to 18% and the higher rate of CGT will increase from 18% to 24%. These new rates will apply from 30 October 2024.
Increasing these rates will clearly affect the benefits of MVLs, although the impact is perhaps not as bad as some had feared, given the speculation that the Chancellor was going to raise CGT rates so that they matched income tax rates.
Another point to consider in MVLs is the Chancellor’s announcement regarding Business Asset Disposal Relief (BADR). BADR is designed to reduce the amount of CGT payable when a business is sold or disposed of.
BADR allows qualifying businesses to pay a reduced CGT rate on gains, rather than at the standard rate.
The lifetime limit on the amount of gains that can qualify for BADR, which the Chancellor has announced will remain unchanged at £1 million, will increase from 10% to 14% from 6 April 2025 and from 14% to 18% from 6 April 2026.
After the General Election which took place in July 2024, the Chancellor announced that the Government would appoint a Covid Corruption Commissioner who would lead the work to recover public funds from companies that took unfair advantage of the Covid-19 pandemic.
The Chancellor announced that the Commissioner would work with HMRC, the Serious Fraud Office and the National Crime Agency to examine an estimated £7.6 billion worth of Covid-related fraud. This includes business loans and grants, incorrectly claimed furlough and abuse of Rishi Sunak’s “eat out to help out” scheme.
Many thought that the Chancellor would announce the identity of the Commissioner during her budget announcement but that did not happen.
When delivering her budget statement, the Chancellor said: “As set out in our manifesto, I will shortly be appointing our Covid Corruption Commissioner, leading our work to uncover those companies that used a national emergency to line their own pockets”.
In fact, work has already begun to claw back fraudulently obtained monies such as Covid bounce-back loans and furlough payments.
We have seen letters issued by the Insolvency Service and by liquidators of companies claiming that such monies have to be repaid personally by company directors.
The Insolvency Service (on behalf of the Secretary of State for Business and Trade) has also pursued director disqualification proceedings against company directors who fraudulently obtained Covid-related payments.
The announcement made by the Chancellor in the budget that the current 75% discount on business rates will be reduced to 40% in April 2025 will see business rate bills for companies almost double (although things could have been worse if the whole of the discount had been withdrawn).
If you would like to discuss any of the issues mentioned in this blog, please get in touch with our Insolvency and Restructuring Solicitors on:
Vicky has over 13 years of experience acting as a Dispute Resolution and Insolvency solicitor. Vicky has specialist expertise in contentious insolvency matters, advising insolvency practitioners, directors in relation to both corporate and personal insolvency issues.
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