CGT Co sale (shares v assets)

[Rediman]

I'm looking to purchase a 20 yr-old small manufacturing closed company business. Don't want to buy the ltd company due to possible skeletons etc, instead I would buy the assets & goodwill for a total consideration of £200k.

However, the Vendors (the 3 directors who are also the only employees and shareholders)say that means they get clobbered with CGT by as much as around 30% for the disposal of assets/goodwill in this way, as opposed to CGT now down to 10% for a straight share transfer of the ltd company. The 3 directors/shareholders share holding and control is 54%, 23% & 23% of £1 shares allotted 20 years ago.

Question 1. What do they mean ?

Question 2. I can offer some of the consideration in the form of Loan Notes for, say, 3 years, as one way of reducing effect of this years CGT. Are there any other obvious ways of structuring the Purchase Offer to help the Vendors avoid CGT liability thereby making the Offer more attractive ?

[demetris]

Well, apparently they have taken professional advice.

They mean that they will when the company sells its assets, it will be assessed on the capital gains (e.g. goodwill) and pay corporation tax on it. In addition, when the company distributes the proceeds to the shareholders they will be taxed on the gain. In other words, they will suffer double tax.

You can eliminate the risk of skeletons by asking the shareholders to sign warranties, indemnity clauses in the agreement etc; a solicitor can help with this.

Demetris Savva BA FCCA
http://www.tax-accounting-london.info