Summer 2009 Newsletter Content Pot and kettle No more stealth Pensions hit A place in the sun Ready or not... Nice motor Making allowances Good times, bad times Tax-free checkup Three square meals Funny question Dividend rules OK? Too good to be true? Pay my friend Early EIS Mind the halfpennies Just the ticket Flat rate changes Foreign Service This year, next year Partial exemption Penalties Compliance checks Under their eye Howzat? Know your rights Discipline Don't be mean Redundancy Two sorts of absence Warranties

Too good to be true? CGT is currently 18% on any amount of gain. Income tax goes up to 40%, and rises next year to 50%. It doesn't take a genius to see that you keep more of a gain than you keep of your income. Not surprisingly, HMR&C may suspect that people will try to turn their income into gains. They have rules which sometimes allow them to turn gains back again and charge the higher income tax rates. An example of this is the liquidation of a small company. If you have accumulated profits and pay a dividend, that's income. If you liquidate the company, the final distribution is capital. But the difference in the tax rates is now so great that the taxman may start to argue that those distributions are really a disguised dividend - particularly if people try to liquidate companies regularly and start up a similar operation afterwards. Some commentators suspect that the CGT rate will have to go back up again soon. In the meantime, bear in mind that your gain may look like income to the taxman. If you want help deciding where the borderline is, we can advise you.