We hope you’re enjoying the summer and making the most of the warmer weather.
August is here and there’s still plenty happening. With the new government taking shape, the Autumn Budget on the horizon and a number of important tax deadlines coming up, now is a great time to take stock and make sure you’re prepared for the months ahead.
If anything in this month’s newsletter catches your eye or raises any questions, we’re here to help. Whether it’s tax planning, staying on top of your compliance, or talking through your business plans, the Clear Vision team is always happy to have a chat.
Company Purchase of Own Shares Under the Spotlight
HMRC has launched a consultation, “Modernising the taxation of distributions and repayments of capital from companies” which proposes significant changes to the tax treatment of company purchase of own shares (POS).
Currently, where the conditions in Section 1033 Corporation Tax Act 2010 are met, the payment received by a departing shareholder can be treated as a capital receipt rather than an income distribution.
This is often advantageous, as the proceeds may be subject to Capital Gains Tax (CGT) (currently from 18%, depending on the individual’s circumstances) instead of dividend income tax rates of up to 39.35%.
Current Conditions for Capital Treatment
To qualify for capital gains treatment, the purchase of own shares must satisfy the following conditions:
- The purchase must be made for the benefit of the company’s trade (or the trade of a 75% subsidiary), or to enable the shareholder to discharge an inheritance tax liability within two years of a death
- The shareholder must be UK resident at the time of the sale
- The shares must have been owned for at least five years before the buyback (reduced to three years where the shares were inherited)
- The shareholder’s interest in the company must be reduced by at least 25% as a result of the buyback
- The shareholder must not be connected with the company following the transaction
Proposed Changes
The consultation proposes tightening the qualifying conditions. Under the new rules, a departing shareholder would be required to:
- Hold at least 5% of the company’s shares for a minimum of two years before leaving
- Have worked for the company throughout that two-year period
- Dispose of their entire shareholding and resign from all directorships on departure
- Retain no shares, even for sentimental reasons
- Complete the full exit within two years for relief to remain available (where a buyback is completed in stages because of limited company reserves)
- Ensure the company pays no more than market value for the shares, with the company taking reasonable steps to support the valuation
- Meet an extended five-year ownership and employment requirement where close family members remain shareholders or directors of the company
- Avoid becoming a shareholder or director of the company again within five years of leaving
If a former shareholder returns as a shareholder or director within five years, any capital treatment previously obtained would be withdrawn. The proceeds from the buyback would instead be treated as an income distribution, with the resulting income tax liability arising in the tax year in which the shareholder originally left the company.
What Does This Mean?
These proposals could significantly restrict access to capital gains treatment on company share buybacks, particularly in family-owned businesses and succession planning arrangements. Businesses considering a purchase of own shares should monitor the consultation closely and review any planned transactions before changes are introduced.
Are You on Track for Your State Pension?
Your State Pension forms an important part of your retirement income but do you know how much you’re likely to receive? Taking a few minutes to check your State Pension forecast can give you a clearer picture of your future finances and highlight any action you may be able to take before you retire. Your personalised forecast shows:
- Your estimated State Pension
- The age at which you can claim it
- Whether you could increase your entitlement, for example by making additional National Insurance contributions
The quickest and easiest way to check is through the government’s online State Pension forecast service. You’ll need to sign in with your government account and may be asked to confirm your identity using photo ID, such as a passport or driving licence. You can also access your forecast using the HMRC app.
If you prefer not to use the online service and your State Pension age is more than 30 days away, you can request a forecast by completing a BR19 application form or by contacting the Future Pension Centre.
Already receiving your State Pension, or decided to defer taking it? The online service won’t be available to you. Instead, contact the Pension Service if you’re in the UK, or the International Pension Centre if you live overseas.
Retirement planning isn’t something to do just once. As State Pension rules and State Pension age can change over time, it’s worth reviewing your forecast periodically so you can make informed decisions about your long-term financial plans.
Temporary VAT Relief on Household Electricity
Households will benefit from a temporary VAT break on electricity over the coming winter, following a government announcement that domestic electricity supplies will be zero-rated for VAT from 1 October 2026 until 31 March 2027.
During this six-month period, the usual 5% VAT charge on domestic electricity will be removed, with the government estimating that the average household will save around £45.
It’s important to note that the measure is limited in scope. It applies only to domestic electricity and does not cover:
- Domestic gas supplies, which remain subject to VAT at the existing rate
- Electricity supplied to businesses, which continues to attract VAT at the standard 20% rate (recoverable by VAT-registered businesses where normal recovery rules apply)
Landlords and Property Owners
If you recharge electricity costs to tenants, particularly in HMOs or properties with shared utility arrangements, you should review how the temporary zero rate affects your billing processes between October and March. Although the VAT rate on the supply changes, the normal rules for recovering input VAT remain unchanged.
For Employers
While the financial benefit for individual households is relatively small, employees may welcome the reduction as part of wider measures aimed at easing household energy costs during the winter months.
In the Spotlight
This month, we’re shining the spotlight on Sally, our fantastic Operations Director – the person who helps keep everything at Clear Vision running smoothly behind the scenes.
Sally’s local to Corsham and is a familiar face both in and out of the office. Alongside our MD Matt, she helps coach their son Stan’s U11s football team. From training sessions to weekend match days, football is very much a family affair.
Away from the pitch, Sally has a real passion for art. Whether she’s admiring a masterpiece, supporting our local Corsham gallery by adding to her collection, or getting creative herself, she’s always inspired by the world around her.
Here’s something you may not know – Sally used to play the cello! It turns out she’s just as talented at orchestrating music as she is at keeping our busy office running like clockwork.
After juggling work, family life and football, Sally enjoys unwinding with a well-earned glass of wine. We’d say that after a rainy Saturday morning on the sidelines, she’s certainly earned it!
How We Can Help
If you have any questions about the topics covered in this month’s newsletter and how they might affect you or your business, please don’t hesitate to reach out.
We are committed to keeping our clients ahead of regulatory changes, so you can focus on running your business with confidence.
At Clear Vision, we’re more than a team of professionals; we’re a group of people who genuinely enjoy supporting our clients. We’re here to help you.
However you need us to support you through your journey as a business owner, we’re here for you!
“A person who never made a mistake never tried anything new.”
Albert Einstein