This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Share purchase

MichaelHaste
Posts:2
Joined:Sat Feb 27, 2021 8:31 pm
Share purchase

Postby MichaelHaste » Sat Feb 27, 2021 8:54 pm

We are a small London based company of less than 250 employees. 5 years ago we sold 60% of our shares to another UK based company. Having now completed our lock-in period following the sale in 2015 we are free to sell our remaining shares (on an enhanced market value basis) to the Majority Shareholder and we are close to agreeing a Share Purchase Agreement with them. However, if we agree to the sale before the end of the current tax year (2020/21) then we believe we will have to pay the CGT owing by January 2022 - but the deal is that we don't receive the funds for 1 year after the agreed sale date. So that would leave me personally needing to find around £0.5m in CGT payment before receiving any funds. My colleagues / minority shareholders have spoken about taking out a bridging loan to cover the period between the tax payment as would be due and shares payment, but I will not do this as the loan would require a guarantee against my property which I am not prepared to risk. Alternatively they have said we could issue our tax returns and simply not pay the CGT thereby incurring either a penalty or interest on the outstanding tax (which all being well could then be paid around 4 months later in April 2022. Having never paid such a penalty (or interest) myself I feel it is wrong to 'purposefully' avoid paying my taxes. What other options might be available or should I stick to my guns and wait out until the beginning of the next tax year (April 6th 2021) to agree to the deal? The big issue here is my colleagues wanting to agree the deal before the Budget on Wednesday 3/3/21.
Many thanks in advance to anyone who can help me!
Mike

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

Re: Share purchase

Postby pawncob » Sun Feb 28, 2021 12:04 pm

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg58000p
With a pinch of salt take what I say, but don't exceed your RDA

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Share purchase

Postby robbob » Sun Feb 28, 2021 1:00 pm

but I will not do this as the loan would require a guarantee against my property which I am not prepared to risk.
Can you not agree for the buying company to provide a loan or advance to cover any taxes falling due before the 1 year date is reached - loan being settled from proceeds that are due to be received shortly after - i have even seen situations where listed companies have picked up the tax tab here - so it is a reasonably common situation that the legal advisors should be used to. After all you are doing them a favour by having this on year lock in clause being activated. A partial release after say 10 months to cover tax sounds like a sensible compromise that surely they coudl be ameniable to perhaps?


Like you aay other that than bridging finance is a pretty common situation and is probably the correct route here if your finances are not over stretched - is there scope for security to be taken out on the assets of the company that will owe you funds ref bridgining finance rather than your own residences? - close to the due date of payment i would almost expect them to have the cash ready and waiting on their balance sheet unless they are very cashflow stretched so i would like to think it can be proven that cash would liekly be sat there waiting in segregated account after 10 months.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Share purchase

Postby bd6759 » Sun Feb 28, 2021 7:43 pm

I really hope that with the sale of shares worth £2-3million, you are taking professional advice.

It would be foolish to agree a share purchase agreement that left you out of pocket. Can you not delay the contract until 6 April? That’s just 5 weeks away.

MichaelHaste
Posts:2
Joined:Sat Feb 27, 2021 8:31 pm

Re: Share purchase

Postby MichaelHaste » Sun Feb 28, 2021 8:32 pm

Many thanks guys/gals - all very useful comments - let's see how I get on with my fellow shareholders tomorrow!
Mike


Return to “Capital Gains Tax, CGT”