www.cvdfk.com tax issues on buying and selling private companies mike cooper iod conference 2011
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www.cvdfk.com
Tax Issues on Buying and Selling Private Companies
Mike Cooper
IoD Conference 2011
Overview of the sales process
Share v Asset sale
Share sale
Asset sale
Prior to sale: Securing the 10% tax rate!
Entrepreneurs Relief (ER) reduces the capital gains tax rate down to 10%. The main qualifying conditions are:
• company must be a “trading” standalone/parent company• shareholder must have at least a 5% holding of ordinary shares &
voting rights• shareholder must be an officer or employee of the company• above conditions must usually be satisfied for 12 months prior to
disposal of the shares
Each individual has a maximum lifetime entitlement to ER of £10million!
Prior to sale: Structuring – property & trade
Shareholders
Property ring-fenced against commercial risk
Can sell property or trade
Most tax efficient
Cheapest to
implement
Sellers planning
• Extracting surplus funds in advance• ER risk
• Dividends/bonuses/pensions
• Salary/dividend freezes
• Share capital reduction
• Claiming reliefs• R&D Tax Relief
• Capital Allowances
• Buy - out minority shareholders?
• Share Options
• Management Buy Outs
• Split of consideration – cash/loan notes/shares
Buyers planning
• Split of consideration
• Intellectual property
• Employment tax
• Property reliefs
• VAT
• Borrowing & debt relief
• EIS/ CVS reliefs
• Due diligence
Post sale: Sellers
Post sale: Buyers
• Reorganise?
• Loss protection
• Claim any missed reliefs
Summary
• Fail to plan, plan to fail!
• Plan now
• Financial information - accounts, CT returns – all must be real time
• CVDFK can help!
Contact
Chantrey Vellacott DFK LLPRussell Square House10-12 Russell Square
LondonWC1B 5LF
Mike Cooper Tax Partner
0207 509 920107976 709910