Small Business Seminar 5 February 2004 Succession Simon McKie McKie & Co (Advisory Services)

“The Law should be prospective, open and clear”. Raz, The Rule of Law Enables businesses and their owners to plan (For growth!)

Three Virtues Lack of Complication Consistency Between Taxes Consistency Over Time

Three Vices Complication Inconsistency Between Taxes Unpredictable Changes Over Time

Disincorporation and Business Splitting Lack of Disincorporation Relief Very complicated provisions dealing with reconstructions/partitions/demergers No coherent code Simple ideas very difficult to achieve

Encourage Incorporation? IR 35 S660A ICTA Lack of stamp duty/SDLT holdover relief on incorporation

An Alternative: Fiscal Transparency for Companies Removes additional layer of tax complexity Retains practical benefits of incorporation No need for incorporation/disincorporation reliefs Works for LLPs Compare US ‘check the box’

Taper Relief Complicated Inconsistent (for assets owned pre-1998)

Over Complication for Small Business? Sch 22 FA 2003 Earn out rights as employee securities

A Contrast? Inheritance Tax Business Property Relief Reasonably Complicated but Tests Well Known Consistent over Time

Summary Simple Tax Systems Predictable Tax Systems Consistent both over time and in approach to incorporation