Purchase of a limited company

by **dhughes1975** on Thu Jul 28, 2011 9:59 am

I have a client that is trying to raise finance for the purchase of a limited company and we are looking into the various ways this can be done. The biggest issue relates to the loan being taken out to purchase the shares. If done personally, the repayments could prove ot be extremely expensive as they will be made from income that has already been taxed.

I have been told that a 'company purchase of own shares' can get around this as any loan taken out to by the company for the purchase would be subject to corporation tax relief. However, I fail to see how HMRC would approve this and what the mechanics of the whole transaction would be.

My suggestion is that they borrow the money personally, pay it out of salary and claim relief for the interest element of the loan as it has been used to buy in to the company.

As I have never dealt with a transaction like this before I would appreciate any advice or just reassurance that my thinking is correct.

I thank you in advance for any assistance.