Share for share exchange

Share for share exchange

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A company  is sold using share for share exchange. Within the company are intangibles worth £400k. The share for share exchange values the company at £2m (unconnected parties so no argument on valuation). How are the intangibles treated in the new company? Are they now worth £2m and is there CT payable therefore on £1.6M? Or do they simply remain at the same value in the accounts of the acquirer?

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By Portia Nina Levin
15th Sep 2014 17:08

Share for share exchange

Dr. Investments £2M

Cr. Share Capital/Premium £2M

End of, unless you are going to hive the assets up. The acquired company's balance sheet stays the same.

If you do hive the assets up, they will get stated at £2M in the parent's accounts, but there are not any CT effects. CTA 2009, Part 8, Chapter 9 refers.

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By TerryD
15th Sep 2014 17:12

Or you could hive them up at their current WDV.

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By johngroganjga
15th Sep 2014 17:22

Answers

How are the intangibles treated in the new company?

They aren't because the new company hasn't bought them - only the shares in the company that owns them.

Is there CT payable ... on £1.6m?

No.  Not sure what you are thinking of.  Which company did you think might pay CT?  The company that issued the new shares?  The company whose shareholders received the new shares?

Do they simply remain at the same value in the accounts of the acquirer?

Well they aren't in the accounts of the acquirer at all are they, so you don't need to worry about what value to include them at?  They possibly aren't even in the accounts of the new subsidiary either, although you don't actually say.

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