s162 incorporation

s162 incorporation

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On a S162 incorporation where the purchasing company already trades and has a number of shareholders, obviously the number of shares issued to the vendor will depend on the value of the unincorporated business being introduced to the company.

If goodwill (relating to the unincorporated business) is valued pre incorporation and then when the post-transaction valuation check is applied for, it becomes necessary to agree a diffeent figure with HMRC, how, in practical terms does the company go about varying the number of shares issued to the vendor accordingly?

Any thoughts  or ideas would be gratefully received.

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By blok
06th Sep 2012 13:48

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I think you are saying that the value of the shares received are greater than the value of relief avaiable under s162.

In that case the excess is surely just taxable as consideration for the disposal of the goodwill?

Rather unusual because if there are other shareholders (I assume not connected) then this should establish the correct MV.

 

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By Tax1976
06th Sep 2012 17:42

Many thanks for your response.

The vendors already hold some shares in the company. The remaining shares are held by the vendor's adult children.

I guess that if the vendor receives too high a value of shares, then it might be that the excess is deemed to be a 'gift' from his adult children? Would that encompass gift holdover relief claims?

Or even worse, might we have an employment related securities issue!?

My brain is starting to hurt!

 

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