Implications of the summer budget 2015 for PE houses

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Business
P Co
“Park” profits
in P Co

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10. Dividend earnings
falling within
Current From
April 2016
0 – £5,000 0% 0%
Basic rate 0% 7.50%
Higher rate 25% 32.50%
Additional rate 30.60% 38.10%
Current From
April 2017
From
April 2020
20% 19% 18%

11. September 2015
Corporation Tax – 20%
Dividend rate – 30.6%
April 2020
Corporation Tax – 18%
Dividend rate – 38.1%
Additional Rate taxpayer
Extraction of £1,000 profit from business
Additional rate taxpayer Company LLP
Salary Dividend
Profit 1,000.00 1,000.00 1,000.00
Employer's NICs (13.8%) (121.27)
Salary 878.73
Employees' NICS (2%) (17.57)
Self employed NICs (2%) (20.00)
Income Tax (earnings) (45%) (395.43) (450.00)
Corporation Tax (18%) (180.00)
Available for Dividend 820.00
Income Tax (Dividends) (38.1%) (312.42)
Available for liquidation
Capital gains tax (28%)
Received after tax 465.73 507.58 530.00
Additional rate taxpayer Company LLP
Salary Dividend
Profit 1,000.00 1,000.00 1,000.00
Employer's NICs (13.8%) (121.27)
Salary 878.73
Employees' NICS (2%) (17.57)
Self employed NICs (2%) (20.00)
Income Tax (earnings) (45%) (395.43) (450.00)
Corporation Tax (20%) (200.00)
Available for Dividend 800.00
Income Tax (Dividends) (30.6%) (244.80)
Available for liquidation
Capital gains tax (28%)
Received after tax 465.73 555.20 530.00

12. September 2015
Corporation Tax – 20%
Dividend rate – 25%
April 2020
Corporation Tax – 18%
Dividend rate – 32.5%
Higher Rate taxpayer
Cost of providing £1,000 (after tax)
Higher rate taxpayer Company LLP
Salary Dividend
Profit 1,962.06 1,666.67 1,724.14
Employer's NICs (13.8%) (237.93)
Salary 1,724.13
Employees' NICS (2%) (34.48)
Self employed NICs (2%) (34.48)
Income Tax (earnings) (40%) (689.65) (689.66)
Corporation Tax (20%) (333.33)
Available for Dividend 1,333.33
Income Tax (Dividends) (25%) (333.33)
Available for liquidation
Capital gains tax (28%)
Received after tax 1,000.00 1,000.00 1,000.00
Higher rate taxpayer Company LLP
Salary Dividend
Profit 1,962.06 1,806.68 1,724.14
Employer's NICs (13.8%) (237.93)
Salary 1,724.13
Employees' NICS (2%) (34.48)
Self employed NICs (2%) (34.48)
Income Tax (earnings) (40%) (689.65) (689.66)
Corporation Tax (18%) (325.20)
Available for Dividend 1,481.48
Income Tax (Dividends) (32.5%) (481.48)
Available for liquidation
Capital gains tax (28%)
Received after tax 1,000.00 1,000.00 1,000.00

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14. LLP Limited Company
• Overall lower effective tax rate
compared to employment income
• Currently overall lower effective tax rate
on dividends (changes from April 2016
will change this)
• Employment legislation not applicable
except worker rights
• Reducing rate of corporate tax
• Ability to attract and award equity to
senior management
• Retain working capital efficiently
• Loss relief for individual partners • Wide variety of reliefs
• Flexibility to grow and adapt • Legislation more stable
• Timing of tax payments
• No minimum percentage ownership
limits for entrepreneurs’ relief

15. Jane Amphlett, Employment Partner
DD: 020 3755 5360
E: jane.amphlett@howardkennedy.com
Leigh Sayliss, Tax Partner
DD: 020 3755 5526
E: leigh.sayliss@howardkennedy.com
Keith Lassman, Corporate Partner
DD: 020 3755 5561
E: keith.lassman@howardkennedy.com
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