Robert’s blog
Selling your company – will you get Entrepreneurs Relief?
Some evidence suggests that larger companies are buying up those smaller ones that are struggling in the current financial crisis. Buy whether you are selling up for this reason or simply because the time has come to retire you will want to keep the money from the deal in your own pocket. Entrepreneurs Relief will help but it’s not a guaranteed solution.
Where a company buys 25% or more of another and pays the shareholders by giving them shares or other securities such as loan stock, in the purchasing company, then the sale won’t usually trigger a Capital Gains Tax (CGT) bill for the sellers. This is called a “paper-for-paper” transaction. Recent changes in the tax rules now allow the shareholders selling their shares to elect to dis-apply the rule which says that a paper-for-paper sale is ignored for CGT purposes. This could potentially mean that a gain could qualify for Entrepreneurs relief instead, thereby saving tax. This may accelerate the payment of the tax liability but could be beneficial overall.
If the amount received for the shares is relatively modest then it could pay to surrender Entrepreneurs Relief and instead spread the sale of the shares acquired over several years and use your (and your spous’s) annual exemption to reduce or even extinguish any liability to CGT.Why it’s worth paying directors’ fees
