Whether it be retirement or plans to start a new business venture, there comes a point in every business owner’s life when they wish to cash in on their equity and/or wish to reduce their day to day involvement. While some business owners may choose to close down the company and distribute the funds and assets, others may instead choose to pass it onto the next generation of key staff or family members.
By taking into account you and your company’s circumstances and your intentions for the future, PD Tax can identify the most tax efficient route for your exit and consider the availability of any reliefs, such as Business Asset Disposal Relief (formerly Entrepreneurs’ relief).
We can assist in the completion of all the necessary paperwork to facilitate the plan or can work with other professional advisors if appropriate.
It may be that you are considering altering the share capital in your company, reorganising a group of companies, or looking at looking at protecting company assets by inserting a new holding company.
In terms of disposing of a business, a sale may be structured by a sale of the shares to another individual or corporate entity, or alternatively via a sale of assets held by the business.
It is important that prior to undertaking a reorganisation that you receive comprehensive tax advice to ensure that the transaction is commercial and that you will not be charged with unexpected and unwelcome tax bills.
PD Tax have helped many clients navigate the complex rules in this area. Taking into account all the relevant taxes and the commercial implications of the reorganisation, we have worked with our clients to ensure that they achieve the best result.
Two director shareholders of a successful trading group decided to go separate ways after they disagreed about how the business should continue.
Within the corporate group was a commercial property from which the main trading company operated and paid rent.
The directors agreed that one party should buy the other out, however the exiting director insisted on retaining his full interest in the commercial property.
The directors were therefore worried about the significant negative tax implications of extracting the rental property directly from the group structure.
Following discussion with the shareholders, we created a bespoke plan to demerge the group into its trading and rental activities before allowing the exiting director to be bought out from the trading activities.
We then prepared a detailed claim for advance clearance from HMRC to confirm they wouldn’t seek to counteract the proposed restructure and buy-out with anti-avoidance legislation.
HMRC duly granted clearance allowing the proposed restructure and buy-out to go ahead as planned.
Overall the plan successfully saved SDLT charges of up to £19,500 and the potential for HMRC to claim that there had been a distribution of the property.
Two brothers wished to split their business interests following a fallout of the families. The dispute became difficult and they needed someone to help them structure the demerger in a way that mitigated tax leakage as far as possible.
We were engaged jointly by the brothers.
Our advice was provided on an independent basis to the solicitors and accountants for each brother. Firstly we set out how the split could best be achieved in essence, in a manner that was as close to tax neutral as possible.
When the parties had each agreed to the method of restructuring, we wrote to HMRC to gain their clearance to the proposed transactions.
On receipt of clearance we set out the tax implications of the transactions in full detail and the accountants and solicitors formulated a deal around the values and the tax implications affecting both sides.
The deal went ahead as suggested by PD Tax.
A statutory demerger of one of the companies. The other company being split by a S110 demerger followed by a buy-back of shares.
The only tax cost suffered by the parties was SDLT in relation to properties transferred through the statutory demerger. As a bonus, a piece of development land should receive a tax free uplift in base cost on a future sale.
Positive comments were received from the professional advisors on both sides as to the advice and level of service provided by PD Tax.
Our client had plans to retire from business and close down his two companies within three years.
The companies held two letting properties which he was keen to retain ownership over as he expected them to experience significant price growth in the forthcoming years.
Our client was unsure as to the most efficient way of transferring the properties into his personal ownership and was concerned about his tax liabilities, both on the disposal of the properties and liquidation of the companies
We sat down with our client and formulated a plan to transfer the properties and wind-down the companies in a cost-effective and commercially beneficial way.
This involved inserting a new holding company with no trading history to which the properties could be transferred. Once all liabilities had been paid and remaining other assets had been transferred to the new company, the two businesses could then be liquidated/struck off.
We guided and supported our client throughout this process by liaising with HMRC, applying for necessary reliefs and corresponding with solicitors.
This restructuring enabled our client to retire from the business within the desired time frame in an economical and practical way.
Going forwards, he will be able to draw down rental income from the new company as dividends.
Some of the shares in the new company may be transferred into trust in the coming months, in order to start planning for Inheritance Tax.
A couple were undergoing the process of divorce, and a significant part their wealth was tied up in a property company owned by one of the spouses. The family court ordered that all assets belonging to the couple were to be split evenly between both parties, including the company/properties.
We were instructed by the courts to act on behalf of both parties to facilitate an equal division of the company and the properties (valued in excess of 1.7m).
Both parties were consulted to gain an understanding of how they viewed the business, in order to ensure that the correct tax analysis was applied from the start. We determined that the most tax efficient way to divide the business was through a capital reduction demerger.
We applied to HMRC for pre transaction clearance, to obtain agreement in advance that the demerger met certain transaction rules. Upon receipt of this, we prepared a full step by step plan for both parties on how the demerger should be facilitated.
Following this, we provided support and guidance to the parties as each step was implemented, including discussions with their respective accountants and solicitors.
The business was partitioned into two completely separate companies. Each company was owned and controlled by a single spouse respectively, separately controlling a 50% share of the former property portfolio.
The planning and structure of the demerger meant that no capital gains tax or income tax was payable on the relevant transactions, and only a small amount of stamp duty land tax was payable overall.
Contact us today to discuss your tax requirements.