I have had a call from a potential client from a mailshot I did a couple of weeks ago.
He has an existing company owned 100% by himself. He wants me to form 2 new companies for him, another newco and a holding co which would own 100% of the shares of the existing company and the newco. He would own 100% of the holding company shares.
Are there any pitfalls I should be wary of or is it as simple of forming the companies with the correct shareholders and transferring the shares in the existing company from the person to the holding company for a nominal amount. Would this transfer/sale have any issues associated with it?
Any thoughts/help would be greatly appreciated
Nigel
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My off the cuff thoughts would be...
.. there would be a capital gain on the transfer of the shares.
This would need to be established by valuing the trading company.
The gain could be rolled over into the new shares, but possibly could crystallise a gain and give a useful tax break.
You would also need to consider the trading relationship of the three companies as group VAT registration may be best if there is going to be lots of cross charging.
Be also aware that with 2, possibly three associated companies the Corporation Tax thresholds will be reduced by 1/2 or 2/3 for each company and may tip one or more into marginal CT rates.
If he is going to take salary from both trading companies there is a potential NI deferment issue too.
I think you need to watch goodwill, as I don't believe amortisation will be tax deductible when there are related parties involved.
As I say, this is just shot from the hip, will come back if anything else comes to mind.