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9.7 However, when the acquiring organisation is a company in which the former owners end up owning shares as a result of the transaction, they might end up being associated persons. We are hesitant to make changes in this area given the scope for inflating gains, the rationale behind the limitation.However, we will continue to analyse the issue and invite submissions on it.It is common for companies to pay interest to associated persons.Again, if RWT on this interest did not need to be accounted for there would seemingly be compliance savings for the payer. 9.16 One possible solution would be to allow a close company to elect to remove RWT on its dividends, and possibly interest payments, to shareholders (and persons associated with shareholders), subject to the directors of the company providing a guarantee that they will pay the tax on any untaxed part of the imputed dividend or interest payment should the shareholders fail to do so.
News and information about the Government's tax policy work programme, including: - proposed changes to the laws that Inland Revenue is responsible for - updates on the progress of bills through Parliament - policy announcements 9.1 In addition to changes to the LTC rules, the review has considered whether changes should be made to the rules around distributions/dividends made by close companies that are not LTCs, and not in many cases QCs.
However, some of the compliance costs would be switched from the payer to the recipient.
Some recipients of the dividends or interest may face increased compliance costs through having to file a tax return when they would not otherwise have to do so and/or through having to pay provisional tax when they are currently under the provisional tax threshold.
The issues that we have been considering in this area are: 9.2 This issue concerns the distribution of capital gains and the associated party rules, particularly where there is a family business reorganisation.
The basic issue can be illustrated by the following example: Example Mark is the sole shareholder of C Ltd, which purchases two farms for 0,000 each.
9.6 It is not uncommon for a family-type company to go through a development phase and then either its shares or its assets are sold to a different organisation.