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Where Taxpayers and Advisers Meet

group reorgansiation

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Posts:351
Joined:Thu Feb 23, 2012 10:26 am
group reorgansiation

Postby Feedback » Thu Jul 26, 2018 5:27 pm

Mr A wholly owns Zco (a trading company), and Ms B wholly owns XCo (an investment company). Lets say they are worth £4m and £5m respectively. Mr A and Ms B are connected persons.

If XCo acquires the shares in Zco, and Mr A acquires 4/9 of the share capital of Zco in lieu of his investment in Xco, even if they are connected persons, does this mean reorganisation relief would apply?

Since Xco and Zco now form a group, can ZCo immediately pay a dividend to Xco and transfer its cash to Xco as franked investment income? I would have thought so. The purpose of the dividend is so that Xco can acquire land for further investment purposes. The added complexity is that Mr A owns the land to be transferred in to Xco

Assuming all transactions are at arms length, and any SDLT is calculated and paid on the market value of the land acquired, as well as any CGT paid by Mr A on the increase in value of land transferred in, is there any reason why the above transaction cannot take place?

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