We're reviewing arrangements where individuals seek to access private company profits without any additional individual tax liability, by arranging for the profits to be passed to them via an interposed company.
We’ve released Taxpayer Alert TA 2023/1 Interposition of a holding company to access company profits tax-free providing:
- an overview of the arrangements we’re reviewing, including an example showing the main features
- our concerns with these arrangements
- what you should do if you’ve entered, or are considering entering, such an arrangement.
The arrangements we're reviewing include the following features:
- A private company has retained profits which it may have paid tax on at the company tax rate.
- The shareholder of that private company disposes of their shares to an interposed company, receiving shares in the interposed company in return.
- The individual applies a capital gains tax (CGT) roll-over to disregard for tax purposes any capital gain on the disposal of those shares in the private company.
- The private company declares a franked dividend to the interposed company.
- The interposed company provides a loan to the individual, sourced from the dividend received.
- Viewed objectively, the arrangements have the dominant purpose of tax avoidance.
We’re reviewing arrangements that display most or all of these features and will closely examine them where we have concerns.
Penalties may apply to participants in, and promoters of, this type of arrangement.
To find out how to contact us for guidance if you’ve entered, or are contemplating entering into an arrangement of this type, see TA 2023/1 – What should you do?
We're reviewing arrangements using interposed companies to access private company profits without additional tax.