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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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.
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?
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.
Asking on this kind of forum without some basic information probably does not really qualify as reasearch
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?'
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?
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
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
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 .
;)
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
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.
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.
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.
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!)
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
Try selling the cash in the company for £1m.
As a buyer, I wouldn’t do that. But you never know.
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
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.