I have a client with a 100% owned limited company for sale with a cash pile, well in excess of 20% of its recent turnover, asset base or expenses. It is definitely a trading business however and the cash is a result of past trading incomes over many years and has no real business purpose.
The potential buyer is looking at buying the shares including the cash pile, so this is not a liquidation. Do I assume correctly I don’t need to worry about the 2016 transactions in security taar which seek to tax cash rich co’s up as dividend distributions?
In which case is there any barrier to the whole proceeds for the share sale being treated as capital in my clients hands? [I am assuming ER wont exist by the time this goes through, but who knows] I have read too much this PM and I think I am getting a little muddled between liquidation vs ER vs capital treatment and as this area has changed to much in the past 5 years I am not sure if I am out of date now.
Its big enough we will get pre-sale advice in due course but looking for a general heads up at this stage, in particular so we can book some dividends this month if it help him out.
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The TAAR only applies if there is a liquidation and the TiS reules cannot apply if there is a fundamental change in ownership
However, if I was the buyer that had to extract the cash from the company, I would be looking to discount the purchase of that cash for the tax I was going to have to pay on it. But maybe the buyer's a corporate with some purpose for the cash.