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CGT

CGT

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One of my clients was a shareholder in a company that was taken over , he received his share of the purchase price for his shares which are subject to CGT as he has no reliefs available.

My question is does the cash surplus he also received as part of the deal form part of the sale proceeds and if not how is it treated. 

Thanks in advance 

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By johngroganjga
25th Nov 2014 16:48

What cash surplus?

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By godwinsj.hotmail.com
26th Nov 2014 07:55

Sorry for not being clearer

Part of the deal was that on top of the purchase price they received any cash surplus in the company at the point of sale.

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By johngroganjga
26th Nov 2014 10:12

That sounds like a dividend. If it is a dividend, then of course that is how it will be taxed. Just ask your client for the dividend voucher.

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By gbuckell
27th Nov 2014 12:06

Or capital

It is quite common for the price for shares to be determined by reference to an agreed figure which is then adjusted for "surplus cash" within the target. In this scenario the payment is just part of the sale proceeds for the shares. But John's suggestion is also possible. It all depends on the paperwork.

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Replying to jaffe123:
By johngroganjga
27th Nov 2014 12:14

Cash surplus

gbuckell wrote:

It is quite common for the price for shares to be determined by reference to an agreed figure which is then adjusted for "surplus cash" within the target. In this scenario the payment is just part of the sale proceeds for the shares. But John's suggestion is also possible. It all depends on the paperwork.

Yes of course, but the key distinguishing feature will be where the money came from.  If it came from the company it is difficult to see how it wasn't a dividend.  If it was extra cash paid by the vendor it is probably share sale proceeds.  That is why I said the OP should ask client for the dividend voucher.  If none forthcoming further enquiry would be required.

The OP also says the payment was "the cash surplus" not a sum calculated on the basis thereof - thus suggesting strongly that it came from the company.

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