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Creating a group

Avoiding CGT on shares when combing two companies into a group

A director owns 100% of shares in trading companies, company A and company B. He wants to transfer his holding in B to ownership by A to create a group with A the holding company. Whats the best way of avoiding any CGT or stamp duty.

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13th Dec 2018 13:27

Why does he want to do it ?

Could be relevant.

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to lionofludesch
13th Dec 2018 13:55

he wants to move a business segment from one company to the other at a later date, but is also thinking of sucking profits up to the holding company via dividend

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By nrw
13th Dec 2018 13:42

Insufficient information available, but assuming it's for a genuine commercial purpose then a share exchange may defer CGT and exempt stamp duty - and HMRC clearance could be requested in advance.

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to nrw
13th Dec 2018 13:56

Doesn't that require fresh shares to be issued in the top company?

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By nrw
to Beancounting
13th Dec 2018 13:57

Yes, which is likely straightforward if s/he owns 100% of both companies?

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to nrw
13th Dec 2018 14:18

Yes 100%. So can a nominal number of shares be issued, so say, the capital of the holding company goes from 100 to 200, or do we need to carry out valuations of the two companies and do the new share issues accordingly

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By nrw
to Beancounting
13th Dec 2018 14:27

In order to determine the number of shares to exchange it is necessary to value the shares being exchanged.

This is typically straightforward and can be included in the clearance application with an explanation as to how both valuations were determined.

If both companies are wholly owned by a single shareholder and CGT is being deferred and stamp duty is being exempted it is likely the number of shares being exchanged, and therefore the valuations of the companies, are of little consequence. Ergo provided a sensible valuation approach is adopted and documented it is unlikely to be challenged.

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13th Dec 2018 15:10

OP, take advice. You're being baffled with bullshit, rather than being dazzled with brilliance.

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By nrw
to Vile Nortin Naipaan
13th Dec 2018 15:16

Vile Nortin Naipaan wrote:

OP, take advice. You're being baffled with bullshit, rather than being dazzled with brilliance.

VNN I'm certainly not brilliant! I was trying to be helpful and I'm always open to being corrected, it would be great to know what I've got wrong here?

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By Dib
to nrw
13th Dec 2018 17:17

What makes you think you need valuations for a start?

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By nrw
to Dib
13th Dec 2018 17:46

Dib wrote:

What makes you think you need valuations for a start?

Typically a share exchange ascribes a value to both sets of shares to determine how many new shares to issue in exchange for existing shares. It would be great to know a simpler / better way of doing it?

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