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Tax Issues on Buying and Selling Private Companies

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!.

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Tax Issues on Buying and Selling Private Companies

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  1. Tax Issues on Buying and Selling Private Companies Mike Cooper IoD Conference 2011

  2. Overview of the sales process

  3. Share v Asset sale Share sale Asset sale

  4. 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!

  5. Prior to sale: Structuring – property & trade Shareholders Cheapest to implement Most tax efficient Property ring-fenced against commercial risk Can sell property or trade

  6. 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

  7. Buyers planning • Split of consideration • Intellectual property • Employment tax • Property reliefs • VAT • Borrowing & debt relief • EIS/ CVS reliefs • Due diligence

  8. Post sale: Sellers

  9. Post sale: Buyers • Reorganise? • Loss protection • Claim any missed reliefs

  10. Summary • Fail to plan, plan to fail! • Plan now • Financial information - accounts, CT returns – all must be real time • CVDFK can help!

  11. Contact Chantrey Vellacott DFK LLP Russell Square House 10-12 Russell Square London WC1B 5LF Mike Cooper Tax Partner 0207 509 9201 07976 709910 mcooper@cvdfk.com

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