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Where Taxpayers and Advisers Meet

Share sale/repossession and moneys retained.

SteLacca
Posts:448
Joined:Fri Aug 07, 2015 2:17 pm
Share sale/repossession and moneys retained.

Postby SteLacca » Wed May 17, 2017 10:06 am

Looking for a pointer from fellow tax professionals on this.

I don't have nitty gritty detail on this yet, but pointers where to look would be handy.

Sale of shares takes place, with consideration agreed by instalments. Assume that CG declared and ER claimed in the year of disposal.

Purchaser defaults on payment, and so shares are repossessed by seller. No monies are returned, and so the original seller is better off by the value of the payments made plus any increase in the value of the shares.

Assume that we are talking about substantial sums. What are (or where can I find) the CG and IT position for the seller (including ER/withdrawal etc)?

I haven't seen the SPA, and so don't know what conditions regarding final ownership were etc. i.e. Whether or not there was a clause that only transferred ownership on the final payment. Assume straightforward contract for the moment.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Share sale/repossession and moneys retained.

Postby pawncob » Wed May 17, 2017 10:43 am

Looks like it gets increasingly complicated. if you haven't already,
Start here and work deeper into the pile:https://www.gov.uk/hmrc-internal-manual ... al/cg14930
With a pinch of salt take what I say, but don't exceed your RDA

SteLacca
Posts:448
Joined:Fri Aug 07, 2015 2:17 pm

Re: Share sale/repossession and moneys retained.

Postby SteLacca » Wed May 17, 2017 11:09 am

It does, but that's a useful starting point. I'm thinking (notwithstanding any overriding conditions in the SPA).

1. TCGA S48 applies in respect of the shortfall in payment of the original transaction, and so refund of CGT paid due.
2. Original seller acquires (as a separate transaction), the original shares, and so no charge to either income tax or CGT arises (subject to there being no transactions in securities issues - I don't have details to determine). Base cost for the re-acquisition will be ?? Shortfall on payments on MV?
3. As a consequence of 2. there is likely to be a market value disposal by the original purchaser, and CGT charge arises on him/her.

Does that sound like it works as an analaysis?

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Share sale/repossession and moneys retained.

Postby pawncob » Wed May 17, 2017 3:46 pm

Could the unpaid sale proceeds be classed as a loan? ESCD18 would be helpful. (and would simplify)

Otherwise, I think it's as you suggest.
With a pinch of salt take what I say, but don't exceed your RDA

SteLacca
Posts:448
Joined:Fri Aug 07, 2015 2:17 pm

Re: Share sale/repossession and moneys retained.

Postby SteLacca » Thu May 18, 2017 11:12 am

Awesome, thank you. ESC D18 seems to fit the bill.


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