Private Company Restructure

Private Company Restructure

Didn't find your answer?

Realise I will need to get some proper advice on this but just wanted to see that there wasnt something fundamental i was missing before going into the detail with an accountant.

Currently have a private limited company with 3 equal shareholders which has been trading for 7 years and has reasonably healthy shareholder fund.

Due to some new opertunities we need to restructure the shareholding and ideally release some of the cash.

The idea is to set up a new limited company with the required new shareholding (3 existing shareholders in differnt proportions plus 2 or 3 new)

New Co would then invoice existing company £xxx for "Consultancy Services"

From this money New Co would purchase the shares of the existing company from the current shareholders.

My assumtions are that

  • Current shareholders would pay captial gains tax on their gains and benefit from Entrepreneurs' Relief
  • New Co as the (now) holding company could offset any proffit it made in the transaction against the loss the existing company woud make so the corporation tax position woud be neutral.

Does this sound right or am i missing something fundamental.

Thanks in advance for any info.

Replies (1)

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By gbuckell
06th Mar 2012 11:22

Dangers

I see some dangers in your proposals:

1. I question the need for "consultancy services". Although taxable in Newco that does not make it tax deductible in Oldco. Who not pay a dividend post acquisition?

2. If the old shareholders control Newco, HMRC could very easily invoke the artificial transactions in securities rules to deem the sale proceeds to be income rather than capital.

As you have stated, it is important to get proper advice on these types of restructuring.

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