Deemed disposal

Deemed disposal

Didn't find your answer?

 Sorry to ask a simple question but having a brain freeze as I can recall something here but can't locate it !

Company X, trades, is profitable and has a certain MV so is worth - say - £1m. Company X is owned by A, B and C in a 1/3rd each ratio.

Company X transfers part (lets say 50%) of it's trade to Company Y, no physical assets transferred, Company Y merely takes on said trade from there in, (Company Y is owned in same proportion as company X by the shareholders A, B and C)

Is the fact that X is now worth half what it used to be a deemed disposal in the hands of A, B and C for CGT purposes even though they are the beneficial owners of the shares in Y Ltd

(As nothing physical has been transferred other than the future trade/goodwill I cannot recall the specifics)

Any help appreciated!

Replies (1)

Please login or register to join the discussion.

By gbuckell
15th Dec 2011 11:50

Disposal of goodwill

If value is passing out of co X without anything physical moving then presumably there is a disposal of goodwill with a CT charge in co X on the profit. There is also a potential charge to higher rate income tax on the shareholders as there is a distribution.

If the client really wants to split the trade in this manner, the way forward would be a demerger. If no sale is on the horizon then a statutory demerger is possible otherwise a liquidation demerger might be necessary. Neither is cheap in professional costs but a lot cheaper than the potential tax charges!!

Thanks (1)