Sam Hart considers those business owners who may be reconsidering their corporate structure and how this could end up causing tax issues.
When setting up a business, incorporation has many advantages, including things like limited liability, scalability, and meeting investor expectations. There has also been an historic advantage to incorporation in the dividend versus salary debate, and back in 2002, when the first £10,000 of profits were charged at zero corporation tax, many micro businesses were incorporated to cash in on this ‘free money’.
Of course, once the magic 0% rate disappeared, so did many of those small companies, and for a while, we had disincorporation relief to aid in unwinding these victims of ill-thought-through tax-incentivising behaviour.
But now, unlike incorporation, disincorporation can be awkward, tax-inefficient, and
