record" in the past, of the question of s. 28 being taken up. However, where a genuine straightforward liquidation is intended without any real tax avoidance scheme tied up with it, clearance is likely to be given even though several schemes may have to be put up before one is finally approved and, in this case, it is nearly always advisable to make application so that the position is free from doubt.

31. In addition to s. 28 the other anti-avoidance provisions in the Finance Act 1960 should be considered in the appropriate case. These, principally (but not exclusively) apply to a sale of shares in a company that deals in or develops land or buildings but again the provisions are widely drawn' and should not be overlooked.

'Finance Act 1960, ss. 21-27 as amended by Finance Act 1962, s. 25.

CHAPTER 6

Conclusion

GUIDE LINES FOR DECISION

In one sense, the title to this last chapter is a misnomer, since it will already have been appreciated that it is impossible to draw general conclusions or lay down any guide lines of general application, particularly since this book is written from the standpoint of an existing limited company, so that the directors and shareholders are not only concerned with the alternative media, but with the problems of changeover from or reorganisation within the company structure. The problem, therefore, is completely different from the problem of the form in which a new business should be set up, since it may very well be that, in this latter case, the partnership is the ideal medium since, even if a changeover to a company is required at a later stage, this can be done without a great deal of difficulty by an issue of shares in exchange for the assets and undertaking of the business.

Much, therefore, depends on the circumstances of the particular case, and the problem varies from extreme to extreme ranging from the expanding and profitable trading company, which needs to plough back as much of its profits as possible (which must surely remain a limited company with the final outlet of a public issue or take-over, for example) to the small agency business with stable profits, whose directors are extremely worried about the disclosure provisions of the Companies Act 1967 and where unlimited liability is no problem, and here, partnership may very well be the answer. In addition, even though the close company status causes considerable fiscal problems, the commercial factors cannot of course, be ignored, and, in particular, the benefit of limited liability, despite the publicity this now entails under the Companies Acts 1948 and 1967. Very often, this alone will deter the decision on changeover since the alternative of a limited partnership is an extremely unsatisfactory one.

Whilst conclusions cannot be drawn therefore, it is possible to draw certain stage by stage guide lines to be applied in considering the problem.

First, the present set up and the future potential should be considered with the advantages and disadvantages listed.

Secondly, the disadvantages as listed should be considered to see whether these can be overcome or at least mitigated by a re-organisation within the company structure. Thirdly, the alternative media should be considered and compared to see whether these offer greater advantages, both now and in the future, than the present set up, after any possible re-organisation within the present structure. For this purpose, the comparison tables in the Appendix can be used to compare the net taxation result of the alternative media.

Fourthly, if the advantages of the alternative media (taking into account the disadvantages) point in favour of the alternative media, the changeover problems should be considered in relation to the particular set up, since these alone may be sufficient to swing the balance back to the existing set up.

Fifthly, discuss the problems and all the aspects thereof with the company's professional advisers.

The application of these guide lines, stage by stage, should ensure that all the relevant aspects are considered and that the final decision is the correct course of action for the company in question, based on the tax law at present. The final guide line, indeed, may be to consider possible changes in the law and in taxation law in particular but, unfortunately, a crystal ball cannot be supplied with this book.

Appendix

COMPARISON TABLES

1. Because of the varying and different factors applicable in each case (e.g. numbers of directors and amounts of estimated profits) specific examples comparing a company and the equivalent sole trader or partnership are of limited use.

2. The following tables therefore set out different rates of tax and reliefs, which may be applicable, to enable a true comparison to be worked out in each individual case.

A. Earned Income

Note.— (i) Relief for income tax and surtax is available at 2/9 up to £4,005 and at 1/9 from £4,006–£9,945.

(ii) For surtax purposes, in addition, the excess of earned income (reduced by the reliefs as at (i)) over £2,000 is deducted from earned income up to a maximum deduction of £2,000. Thus £5,000 earned income is reduced by £1,000 (i.e. relief at (i)) and a further £2,000 (maximum) to £2,000 so that, in the absence of unearned income, no surtax is payable.