Acquisitions - Tax planning for growing businesses
Shares vs assets
The key question on any acquisition is whether to buy shares or assets.
For buyers assets offer more advantages – no acceptance of history, tax relief on plant, goodwill etc. For sellers a sale of shares normally provides a tax charge at 10% whereas a sale of assets out of a company gives rise to an additional tax charge in the company before any personal realisation of proceeds. This can only be resolved by negotiation. You need properly to understand the risks and possible benefits before making final decisions.
Structuring for the future
Once the acquisition is made you need to look at the way forward. The Substantial Shareholdings Exemption provides (very simplistically) for an exemption from tax on the disposal of a subsidiary out of a trading group. Because of this relief it is now sensible at least to consider a group structure for acquisitions to provide the possibility of relief on a future sale of part of the business, i.e.
The structure provides additional opportunities including the ability to provide transparent reward structures in each company, easy separation and recharge as required of main board costs and some corporate protection in the event of one business failing. On the downside it creates additional associated companies with the consequent tax implications.
Date: 9th April, 2007
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