Best tax options, selling a business.

Business to be sold, what is most cost effective for the £1mil cash

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My wife and I have a business that is to be sold for around £1mil.  The deal is I get the £1mil and I understand I can have 10% relief. 
 

I also have £1.1M shareholders funds and the deal is i get all of that as well.  

What is the best way to limit my tax as I get the vibes that I pay full tax  ? 
 

Replies (22)

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By graemeban123
08th Aug 2020 09:33

Whilst I do not like to see the responses by certain individuals on here always giving the same advice to speak to an accountant, in this case it is the obvious answer.

A business with the sort of retained funds and sale price you are stating must already have an accountant. Speak to them about it. Yes it will cost you money but the amounts you are on about it shows you can afford it. Speaking to them will ensure they will have access to all the relevant details relating to your personal situation and what you plan to do with the funds you are about to receive. They can do tax planning which can not only potentially save you tax now but defer it to be paid at a later date, depending on what you do with the income from the sale.

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the sea otter
By memyself-eye
08th Aug 2020 09:37

What does your accountant (or tax adviser) say.
I assume that if you are worth a million pounds you have one - although the vibes I'm getting from your question suggest otherwise?

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By Fredsmith1
08th Aug 2020 10:32

Appreciate the response. Yes I have an accountant and also a trustworthy one that I sincerely trust.

However, when your talking about the sort of money I Personally believe I should do some research myself.

Thank you

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Replying to Fredsmith1:
paddle steamer
By DJKL
08th Aug 2020 11:53

The research you ought to be doing is researching the correct accountant to use, if that is your existing accountant I would talk to him/her without delay .

In fact given that you already know the price to be achieved you are already a little late, the time to talk to him/her was at the first inkling there might be a business sale, then perhaps the structure of the preferred type of sale transaction might have been determined at the outset and the tax and other consequences of the myriad possible sale routes examined before you apparently agreed the mechanics of the sale.

It may be the mechanics you have agreed are optimum but unless someone fully understands the art of the possible regarding the purchaser's funding and your and your wife's tax options as sellers, who can say.

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Replying to Fredsmith1:
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By Paul Crowley
08th Aug 2020 13:59

Asking on this kind of forum without some basic information probably does not really qualify as reasearch

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Replying to Fredsmith1:
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By paul.benny
08th Aug 2020 14:21

Certainly it's good to do some research of your own. But start by interrogating the advice you've been given rather than asking for general advice from strangers who know nothing more than the few facts in your question.

Ask your accountant to explain the basis for their advice and probe from there. A good question is 'what are the alternatives?'

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Replying to Fredsmith1:
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By John Isabel
21st Aug 2020 14:19

Quote:

Appreciate the response. Yes I have an accountant and also a trustworthy one that I sincerely trust.

However, when your talking about the sort of money I Personally believe I should do some research myself.

Thank you

Nonsense

What you should actually be doing is paying your existing advisor, whom you say you trust, to talk to you about this - or if you don't trust his judgement, find another one.

Your 'research' will most likely give you a half baked preconception on how you should proceed and your accountant will then have to explain delicately what you are wrong on x/y/x.

On another note, my car needs a service and new brake pads. Anyone know a forum for mechanics where I can 'research' the processes before I take my car down to my local garage (whom I sincerely trust) for them to do the work?

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By Anonymous.
08th Aug 2020 11:54

We can certainly take a look for you. Is it a company, in which case can you send a link to the accounts on the Companies House website.

If it's no a company, could you post your sole trader/partnership accounts on here (not sure how you do that).

Also, any other details about your personal financial affairs would be useful to ensure the advice is fit for purposes.

Thanks

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Replying to Anonymous.:
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By bernard michael
08th Aug 2020 12:03

Quote:

We can certainly take a look for you. Is it a company, in which case can you send a link to the accounts on the Companies House website.

If it's no a company, could you post your sole trader/partnership accounts on here (not sure how you do that).

Also, any other details about your personal financial affairs would be useful to ensure the advice is fit for purposes.

Thanks

If he did as you suggest I doubt any AWEB members will give him anything other than outline advice without his personal tax situation .
Also as he's posted as Anonymous it would blow his cover

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Replying to bernard michael:
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By Anonymous.
09th Aug 2020 01:04

Quote:

Quote:

We can certainly take a look for you. Is it a company, in which case can you send a link to the accounts on the Companies House website.

If it's no a company, could you post your sole trader/partnership accounts on here (not sure how you do that).

Also, any other details about your personal financial affairs would be useful to ensure the advice is fit for purposes.

Thanks

If he did as you suggest I doubt any AWEB members will give him anything other than outline advice without his personal tax situation .

;)

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Replying to Anonymous.:
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By Tax Dragon
08th Aug 2020 12:29

Anon. wrote:

We can certainly take a look for you.

No, we can't. See John's post at 18.24 on 6 August here: https://www.accountingweb.co.uk/any-answers/the-any-answers-advice-line

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Replying to Tax Dragon:
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By Anonymous.
09th Aug 2020 01:06

Quote:

Anon. wrote:

We can certainly take a look for you.

No, we can't. See John's post at 18.24 on 6 August here: https://www.accountingweb.co.uk/any-answers/the-any-answers-advice-line

Thanks. I'm really struggling to keep up with the rules! I thought we'd gone all "everyone welcome" and no holds barred questions. Shame, I was looking forward to doing a couple of sides of A4 on this question.

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Replying to Anonymous.:
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By Tax Dragon
09th Aug 2020 07:16

I knew full well the point you were making. My reply was intended to repeat your point without the sarcasm.

Think about it. If the OP posted the question 'in good faith' expecting advice, then he doesn't begin to understand the issues, or maybe even appreciate that there are issues. Hinting at the issues sarcastically will go straight over his head - he'll think we could advise. And I really didn't want him to continue to think you were being serious.

Pointing to the 'rule' was the lazy way of interpreting your point sans the humour. This reply is the less lazy way. (Bernard is going much further and at least setting out some of the computational points - but obviously there is work to do before you start doing computations, so those comments are the visible part of the iceberg). The three of us... in fact I think all those that have replied... are saying basically the same thing.

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Replying to Anonymous.:
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
11th Aug 2020 16:15

Sorry, TD & Anonymous, but I said "there is NO ban" on putting yourself forward as a potential adviser. The gentle invitations presented here are perfectly acceptable, though if the facility existed to review someone's accounts on AccountingWEB, I really, really wouldn't advise doing that in public.

A bit of light scarcasm aside, thank you all for the patience and gentleness of your questioning of the OP in this instance. You have all provided a lot of sensible advice and basic material for him to chew on, but this is not the place to nail down definitive advice on a transaction of this scale.

Given the confusion arising from all my recent posts, we'll compile a brief set of bullet points on the standards of behaviour we expect on Any Answers and publish them in the Insider on Friday.

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Replying to John Stokdyk:
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By Tax Dragon
11th Aug 2020 17:00

John Stokdyk wrote:

Given the confusion arising from all my recent posts, we'll compile a brief set of bullet points on the standards of behaviour we expect on Any Answers and publish them in the Insider on Friday.

Thanks John - but don't they (also) need to be somewhere that people joining the forum will stumble across as they make their first post/ask their first question? (I don't know if you are aware, but Maddy recently closed down a thread for the stated reason that the OP appeared to be pretty rude to some of the respondents. That I could see, the rudeness was all one-way, so possibly your recent posts have had the desired effect on the rest of us!)

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By bernard michael
08th Aug 2020 12:02

Are you getting a total payment of £ 2.1 million or £1 million your question is unclear as you state "the deal is I get a £1 million"and then talks about the reserves also being paid

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Replying to bernard michael:
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By Fredsmith1
08th Aug 2020 12:56

1m for the shares. Plus the cash left in shareholders fund of 1.1m.

I also get what people are saying talk to your accountant and yes my accountant was onboard at the start. It is a lot of money to me from 22 years hard work from a kid so just wanted to get some other information.

Thank you

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By mrme89
08th Aug 2020 13:02

Try selling the cash in the company for £1m.

As a buyer, I wouldn’t do that. But you never know.

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By bernard michael
08th Aug 2020 13:10

Now it starts getting tricky. How are you to receive the "reserves cash"
Dividend
Salary bonus
Combination of the 2
They all have different tax effects
Also
The sale proceeds however structured go to both you and your wife
What are the % shareholdings??
The above are further queries, which add to the problem
AND
Without the full tax position of both of you make it impossible for anyone on Aweb give you a proper answer. The only person with this information is your poor accountant who I hope isn't reading this. As everyone is saying talk to him and listen to what he says

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By Paul Crowley
08th Aug 2020 14:32

Impossible to give any opinion without proper details
Who is selling what?
Co selling the business?
People selling the company shares?
2 People selling, but only one person getting proceeds.
If company selling how does it get 10% tax charge
If company selling: company will have Corporation tax to pay

Does current trustworthy accountant suggest that money from company is dividends for accumulated reserves, but BADR for shares

We have adsolutely no information, your accountant has all the cards in his hands and is probably giving good advice based on what you have told him. He had the opportunity to ask all 20 questions to understand the deal you arranged and your intension on whether to liquidate now or hold the company and spread dividends over the next ten years.

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By Fredsmith1
09th Aug 2020 18:58

I get what your saying.

My wife has 45 percent I have 55 percent. It was pointless me posting as you are correct there are many other factors. The sale isn’t due to go through till 1st May 2021 so excuse my ignorance in posting.

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Replying to Fredsmith1:
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By Tax Dragon
09th Aug 2020 19:18

Best advice: let your accountant know asap about your plans.

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