TAAR

Question 1

What is TAAR

Answer 1

Targeted anti avoidence rule that is designed to prevent ‘phoenix’ arrangements
Where a shareholder winds up their company and then starts a new company with a similar trade. The whole purpose of winding up the intial company was to extract reserves as a capital distribtuion paying CGT tax rates(likely to be 10% due to BADR)

Question 2

What are the conditions for TAAR

Answer 2

1. sarah owns at least 5% of the ordinary share capital and voting rights in the intial company immediately before winding up
2. The company is a close company when it is wound up or was at some point in the 2 years prrior to being wound up
   3.At an point in the 2 years following the company being wound up the indiviudal is involved with carrying on a trade with similar activities to those of the company wound up (company with at least 5% interest, sole trade or partnership)
3. it is reasonable to assume the only reason sarah wound up the initial company was to reduce her income tax liability.

Victor cant take rennies

Question 3

What is the result if TAAR applies

Answer 3

The distribution is treated as an income distribution and not a capital distribution