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Entrepreneurs relief - ltd co

Entrepreneurs relief - ltd co

I have a client who wants to form a ltd co but it worried about not getting entrepreneurs relief when selling the business. He;s not planning on selling the business for a while but has to assume for now the same measures will be in place.

I know if he sold his shares he would get entrepreneurs relief but if he didn't sell the company and just sold the business, ceasing the company at the same time is there any scope for getting any relief as an associated asset on the goodwill payment he would receive for the client base and if so how do this work?

Any help appreciated.


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11th Jun 2009 13:18

Yes and No....
He will always get ER on either the sale of the shares or the proceeds of winding up or striking off (assuming he gets any distribution treated as capital under ESC C16).

However, the sale of goodwill etc will be a sale by the company and therefore liable to corporation tax, the net of CT amount being distributed and liable to CGT on the shareholder. Even so if the company qualifies for ER on cessation of trade, the compounded rate of tax (22% CT and 10% CGT on the remaining 78%) is 30%.

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