Capital extractions and the 2008 PBR

One of the big changes in the PBR was the new 45% tax rate to be implemented from April 2011. This applies to income though and not capital. Company shareholders are in the enviable position of being able to accumulate cash within a company and then extract it as a capital distribution subject to capital gains tax at 18% even if it exceeds £150,000. If this was income it would trigger the new 45% income tax charge, but as a capital extraction it's taxed at just 18%. In theory Entrepreneurs Relief could also be due to reduce the rate of capital gains tax to 10% if the company was a trading company. However in practice the Revenue would challenge such a claim in many cases on the basis that the company had 'substantial' non trading assets (ie cash in the bank). Nevertheless 18% is a lot better than 40% or 45%.