The Belgium Plan
Originally sent: April 4, 2005This year?s budget was quite sedate compared to some of the very controversial measures pushed through by Gordon Brown in earlier budgets. Only to be expected, of course. You really don?t want a controversial budget a few weeks before a general election.
There were still some anti-avoidance measures to be found, however. One of these was aimed at what I referred to as ?The Belgium Plan? in my book and Focussed Training Day ?Corporate Exit Route Strategies for the Smart Financial Adviser?.
The idea of the Belgium plan was to establish bona fide tax residence in Belgium throughout the full tax year in which your Company is sold. As a result of the tax treaty with Belgium, and the fact that there is no Capital Gains Tax to pay on the sale of a private family company under Belgian tax law, this meant the Capital Gains Tax on the sale of the Company would be reduced to zero.
In the latest budget there is specific provision outlawing the use of tax treaties to obtain an ?artificial? reduction in tax liabilities. This is aimed at a number of schemes, but certainly the most prominent of these is ?The Belgium Plan?, which has proved a very popular manoeuvre.
The Revenue have put forward a most interesting view. They deny that the manoeuvre ever worked in the first place, despite numerous counsels? opinions to the contrary, but at the same time have put this anti-avoidance provision in place to stop people using it in the first place. I have a vision of a tax inspector standing in the playground in his shorts and school tie, exchanging meaningless insults with his school friend, shouting ?Nah, nah, nah, nah, nah ? it never worked in the first place!?
What is even more bizarre is that it seems the Revenue have no intention of chasing after the tax that leaked out of the door before they closed it. The door, that is, that according to their stated view never existed in the first place!
The opinion of many practitioners is that the new provisions could easily be challenged under European law. Assuming, of course, anyone is brave or rich enough to challenge them in the first place. Especially as it looks as though the Revenue won?t be challenging those clients who took advantage of this non-existent door before it was closed. The answer, of course, is simply to find another strategy that does work.
Needless to say, I have now deleted ?The Belgium Plan? from my book and will not be referring to it on future training days (the next of which is, by the way, on Tuesday 7th June ? note it in your diary, as I am expecting to see you there!). This is no real loss, as there are so many opportunities of reducing tax or even avoiding it altogether. What it does remind us is that tax planning is an ever changing discipline. It can pay you very well if you keep up to date, and you can pay very dearly if you don?t!
Adviser Breakthrough Training Solutions Ltd. takes no responsibility for loss occasioned by any person acting or refraining from action, or in consequence of any other person acting or refraining from action, as a result of the material in this article.
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