Accounting and tax clearance for deferred company own share purchase
I have a client who has a historical holding / trading company arangement and now wishes for the holding company to purchase the shares of a departing shareholder but on a deferred payment basis.This is for cash flow reasons.
Holding company has 3 shareholders, one of which wishes to sell his 3 shares and the remaining shareholders are doing this via a Company purchase of own shares. The selling shareholder does qualify for this treatment.
The Holding company does not trade but receives Dividends from the 100% Subsidiary to pass on to the Shareholders.
The Agreement is that the 3 Shares are purchased now, beneficially, by the Holding Company for £50,000 per share but the Company will actually pay the departing shareholder £50,000 on the date of signing the sale agreement, £50,000 within the next 2 years and the remaining £50,000 within 3 years.
The subsidiary has sufficient distributable reserves to declare a Dividend for the full 3 shares but I am not sure of the Accounting treatment required here - I am not sure that the Subsidiary can vote a Dividend for £50,000 to the Hoding company now and in the next 2 years Accounts declare further £50,000 Dividends or whether it must declare a Dividend for the full 3 shares and £150,000 now. If the latter, then the Subsidiary has not the funds to pay the full consideration so can it be shown as a Debtor in the Accounts for the remaining £100,000.
Finally, I am preparing a Clearance application to HMRC for this transaction. I am not sure whether this will be granted or whether this transaction will be treated as a Distribution.
Any advice would be welcome. Thanks.
- first year company tax return for a limited company 1,405 28
- Can I take action against my accountant for incompetence? 1,229 25
- Dividend dates 425 7
- Do I need to report this to SOCA 3,224 31
- Leaving Flat Rate Scheme for VAT 173 5
- Not a good start no broadband 441 10
- DEATH OF A SHAREHOLDER NO SHAREHOLDER AGREEMENT 117 2
- is this fraud? 696 12
- Married woman dies owning marital home 438 4
- Has anyone read the implications of the Lisbon treaty? 696 14
- new software IXBRL and Accounts production? 189 2
- PPR CGT section 222 builds an extension 63 1
- Intrastat triangulation 56 1
- CGT 145 3
- Supplier refund treatment in Sage Line 50 186 4
- Question regarding gym training 368 6
- Sage Starting Again As Records are in a mess 159 3
- CIS Deductions 231 1
- Entrepreneurs relief available? 422 8
- Property initial recognition 163 2
- Property exchange - 8-year legal delay following fall-out 583
- Cancelled 342
- SAGE Payroll Data for Import to MS Dynamics AX 327
- Cancelled 280
- Have you staged yet for auto enrolment? 250
- Probiz 232
- VAT on non-profit making clubs (ECJ VS West Dorset Golf Club) 173
- Phishing emails purporting to be from CIPFA? 172
- Car leasing scheme 165
- Is this UK incapacity benefit taxable in UK or Jersey? 150