Hey There,
A friend (Bill) and I are looking at buying into another friend's (Dave) business, partly because we think he's building some interesting technology, but mainly because it seems like a tax efficient way to give him some money (he helped us out a little while ago on our business, so we want to 'repay' him).
My questions to the team here is:
- If we spent £1mn buying shares off of Dave in his company, what would his taxation be on that £1mn? I assume he will pay Capital Gains Tax, or maybe Entrepreneurs Relief on the £1mn proceeds from his shares?
- Is this legal/allowed? It's effectively a tax efficient way to give Dave money vs just gifting it to him. (He would be paying CGT/ER vs Gift Tax)
We would look to draw up a proper share purchase agreement, but I wanted to check with others on here on whether any issues could potentially arise from this?
Many thanks in advance
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