What is Targeted Anti-Avoidance Rule (TAAR)?
TAAR stands for targeted anti-avoidance rule (TAAR). As per the finance act 2016, targeted anti-avoidance rule is a rule introduced to tackle those individuals who falsely reduce their tax liabilities by converting dividends into capital payments by winding up their company. The rules mainly apply to distributions made to an individual on winding up of company on or after 6th April 2016. Under this rule, individuals are judged on the basis of certain conditions, if met, the distributions will be liable to dividends tax as opposed to capital gains tax (CGT). This rule prevent individuals from Phoenixing their companies by winding up their businesses. The main purpose of this rule is to identify the individuals following the wrong procedure to avoid or minimise taxes by winding up their companies.
When does it apply – conditions?
There are certain conditions specified for distribution from winding up to an individual on or after 6th April 2016 and subject to income tax, if all the below conditions are met –
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