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Offline stoney13  
#1 Posted : 11 June 2014 15:43:05(UTC)
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Is it open to HMRC to argue that substantial cash accumulated from successful trading affects the company's trading status -
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Offline Freddy  
#2 Posted : 24 July 2014 11:31:33(UTC)
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Hi Stoney13

Thought you may find this initial link to HMRC's internal manuals helpful an extract states the following:

"However, the long term retention of significant earnings generated from trading activities may amount to an investment activity. The first point to consider is whether or not there is any identifiable activity distinct from the trading activity.

Factors to consider include:
•whether the earnings are retained for the present and future cash flow requirements of the trading activity.
•the nature of the underlying investments used as a lodgement for the funds, for instance if the funds are locked into long term investments or the investments themselves are high risk that may suggest that they are not available for the trading activity.
•the extent of the company’s (or group’s) activity in managing the investments.
•whether the funds have been ear-marked for a particular use in the trading activity.
"

HMRC Manuals CG64060 Trading Status Entrepreneurs’ Relief

I had in mind that from memory that if more than 20% of the net assets are cash that could affect trading status and this additional link about "substantial" in respect of non trading activities (including holding cash) and the affect on trading status might also help get you in the right direction at least.

Hope that helps but do your own research too...

Freddy

Edited by user 24 July 2014 11:33:34(UTC)  | Reason: correction to link description

"Tax Does Not Have To Be Taxing". HMRC's old advert always makes me laugh for it's sheer stupidity...
Offline TaxGuru  
#3 Posted : 22 August 2016 17:24:03(UTC)
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Freddy and Stoney13

It has long been a concern of many tax advisers...

However consider this...

... the New "anti pheonixing" rules from 6 April 2016 may not have been needed if holding more than 20% of balance sheet assets as cash was a problem after all...

No doubt some of the new rules from 6 April 2016 have come in because a growing number of companies were being wound up with over 20% of assets as cash and obtaining Entrepreneurs Relief then doing the same exercise again a few years later...

The revolving door being used by the few no doubt lead to the new rules that for one mean that you cannot start a similar trade within 2 years and have entrepreneurs relief...

Think this is an admittance effectively that over 20% of assets as cash is not in itself a barring issue.

This is a complex area of tax though so do your research....!

TaxGuru
Offline LeahCooper  
#4 Posted : 14 December 2016 14:50:58(UTC)
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Originally Posted by: Freddy Go to Quoted Post
Hi Stoney13

Thought you may find this initial link to HMRC's internal manuals helpful an extract states the following:

"However, the long term retention of significant earnings generated from trading activities may amount to an investment activity. The first point to consider is whether or not there is any identifiable activity distinct from the trading activity.

Factors to consider include:
•whether the earnings are retained for the present and future cash flow requirements of the trading activity.
•the nature of the underlying investments used as a lodgement for the funds, for instance if the funds are locked into long term investments or the investments themselves are high risk that may suggest that they are not available for the trading activity.
•the extent of the company’s (or group’s) activity in managing the investments.
•whether the funds have been ear-marked for a particular use in the trading activity.
"

HMRC Manuals CG64060 Trading Status Entrepreneurs’ Relief

I had in mind that from memory that if more than 20% of the net assets are cash that could affect trading status and this additional link about "substantial" in respect of non trading activities (including holding cash) and the affect on trading status might also help get you in the right direction at least.

Hope that helps but do your own research too...

Freddy



Thanks for helping.
If you haven't got anything nice to say about anybody, come sit next to me.
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