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Retirement Relief restriction ??

A client runs a company in which the shares are owned 50/50 by himself and his ex-wife. In order to realise the value in the company (approx £300K) he needs to wind up the company, and make a capital distribution.
He is 52, his ex-wife 47.
He will claim retirement relief on his gain, as he is effectively retiring from the business.
The commercial reason for his actions is that his wife does not work for the company, and therefore half of all the profit he makes is contributing to his ex-wife's net worth!

This being the case, he intends to recommence trading after the present company is closed down (albeit in a smaller, less stressful and lower powered way), in order that he maintains an income, and keeps his clients happy.

Can anyone suggest whether he may run into problems with his retirement relief, and should he leave a gap between stopping and starting ?

Many thanks!
Razorsharp

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By admin
04th Oct 2000 15:07

Alternative strategy?
What is the main aim here - to acquire the ex-wife's share, to avail the client of the available retirement relief, or both?

If the former, is there any reason why the company can't buy back her shares - providing certain conditions are met this could be deemed to be a capital payment to her, as would be the case with a capital distribution on a winding up. This would then leave the client wholly owning his present business.

Although (to my knowledge) there is nothing to stop a taxpayer winding up his business, claiming retirement relief, and starting another business almost straightaway, doing so seems rather provocative.

That said, I believe a possible problem in starting a similar business soon after a cessation might be the deemed disposal of goodwill by the old company to the new one. The Revenue could deem this to be a chargeable disposal (market values applying), subject to the availability of a hold over claim.

On balance I'd look into the share buy-back option first. If the client wants to avail himself of retirement relief there are other well documented ways of achieving this (via a Trust or a new holding company).

Hope this helps.

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