UK tax year end planning 2019/20: Entrepreneurs’ Relief

Sadly, there is no US equivalent to Entrepreneurs’ Relief for the sale of UK businesses, so a gain that is subject to only 10% UK tax will most likely suffer an additional 10% US tax as well as Net Investment Income Tax (NIIT) at a flat 3.8%.

Last updated: 3 February 2020

That would give a global tax rate of 23.8% on a gain on the sale of a business asset. NIIT is not due on the sale of business assets, but it is due on the sale of shares, including those in privately owned companies.

With US tax reform in 2018 introducing significant changes to how US owners of foreign businesses are taxed, advice should be sought to see how these changes affect US owners. In addition, with the announcement last year that the Corporation Tax Cut from 19% to 17% from April 2020 is to be put on hold, this may change some of the planning if a potential high tax exemption is available in the future against the US Global Intangible Low-Taxed Income (GILTI) tax.

What should I do?

If you are a US owner of a foreign business, you should consider the implications that the 2018 US tax reform has on your global tax bill. There are some additional tax considerations such as the GILTI tax, which may lead you to make an election for the company to be transparent, electing to be taxed as a US company, or using alternative tax mitigation techniques. Also with UK Corporation Tax looking like it might remain at 19% for the time being, you should factor this into your planning.

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