Selling Ltd. Company (with cash in hand) - Tax?

by **johngruer** on Mon Jul 19, 2010 2:28 pm

Hi,

Our business is a Ltd. company, 2 Directors (Husband/Wife) with 50% shares each.
We are selling for £340,000
There is £150,000 cash in the business bank account.

Can anyone advise on the tax implications for the sale? Would we just pay 10% CGT? Do we qualify for ER?
Any advice on getting the cash out of the business in the most tax efficient way?
Any other things to be aware of?

Thanks in advance,

John

by **carolh65** on Mon Jul 19, 2010 3:29 pm

What are you selling? Your shareholding in the company? Or business (goodwill, stock asset etc)?

by **johngruer** on Mon Jul 19, 2010 3:31 pm

Hi,

We are selling the whole company.

by **section 44** on Mon Jul 19, 2010 3:43 pm

Does the company have distributable reverses?

If it does then, to that extent, arguably you would be seeking to turn income into capital if you were to simply sell the shares and the transactions in securities anti-avoidance rules should bring some or all of the profit back into charge as income rather than capital.

by **Incredulum** on Mon Jul 19, 2010 4:47 pm

Arguably also a business with that much cash in it has a risk of not qualifying for ER as it is not a trading company - is there even a risk of being a close investment holding company and paying corporation tax at the full rate?

by **johngruer** on Mon Jul 19, 2010 9:03 pm

Thanks for all your replies - what does this mean in simple terms? Could we draw some of the cash as a dividend before the sale?

by **johngruer** on Mon Jul 19, 2010 9:04 pm

Thanks for all your replies - what does this mean in simple terms? Could we draw some of the cash as a dividend before the sale?

My understanding was if we sold the stock of the company rather than the assets, we'd be only liable to pay 10% on whatever we got for it.

by **Incredulum** on Tue Jul 20, 2010 12:13 pm

If you sell the shares then CGT rate will drop to 10% (subject to the maximum levels).

However, beware that you may not have a trading company at all:

http://www.hmrc.gov.uk/manuals/cg4manual/cg64060.htm

by **johngruer** on Tue Jul 20, 2010 2:01 pm

Incredulum wrote:If you sell the shares then CGT rate will drop to 10% (subject to the maximum levels).

However, beware that you may not have a trading company at all:

http://www.hmrc.gov.uk/manuals/cg4manual/cg64060.htm

Thank you for this.

Regarding being a trading company - the cash in the business is just money that has been made through trading. It is profit that has not been withdrawn. How does that affect things?

Thanks,