Sale of Group

Pre Sale Transfers

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I just wanted to check I am not missing anything in below scenario. I have considered the rules re: SSE/De-Grouping Charges & transfers between a group at a NGNL and unless told otherwise, cant see any tax issues here:

Holdco is being sold. It has two subsidiaries, both trading co's (A & B). The trading co's are service based companies and therefore main chargeable asset is goodwill

Buyer only wants Holdco, Company B & part of the trade of Company A. The parties involved want it structured per the below:

Prior to sale Company A will transfer the relevant trade to Company B. Holdco will transfer Co A to a new Holdco) Holdco(existing) will then be sold, owning Co B (plus some trade transferred from A) 

A degrouping charge usually applies when the recipient company leaves the group, but here it is the transferor of the asset (goodwill) leaving the group so I assume no issue here?

The trade left in Company A is fairly small (T/O £20k) and the company has net liabilities, the value of the transfer of A out of the group will therefore be nil.

My understanding is the transfer of the goodwill from A to B will be on a NGNL basis and assuming we are ok with the transfer of A from holdco to New holdco is at market value (£Nil) there are no issues here either?

The above is similar to a hive down scenario I guess which would normally create a de grouping charge (often covered by SSE for the seller), however here it is not the recepient company of the trade being sold it is the holding company. 

Any thoughts would be greatly appreciated. 

Replies (5)

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By Tax Dragon
15th Aug 2022 15:27

As I read this, Company A has a desirable trade and assets and some undesirable liabilities. You propose, in essence, to take out the trade and assets (implicitly for no consideration) and leave the liabilities - reducing A's value to Nil, you say. Never mind the tax (we can come back to that) - is what you propose lawful?

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Replying to Tax Dragon:
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By SA2016
15th Aug 2022 15:40

I should have added that effectively it is insolvent due to director loans, what is left is a very small company with minimal net assets (excluding the D loans)

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Replying to SA2016:
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By Tax Dragon
15th Aug 2022 15:45

So why not (and this isn't advice, obvs) sell the trade and assets to B for full value and repay the loans tax free? (Presumably the directors are also the ultimate shareholders?) To ask that question from the other end of the query stick... what tax advantage is there in NOT charging for the trade and assets?

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Replying to Tax Dragon:
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By SA2016
15th Aug 2022 15:55

I have offered many suggestions to this deal including that proposed, but they are adamant they only want to do it as mentioned above (clients eh!)

Would appreciate any thoughts regarding my understanding of the position as is .

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Replying to SA2016:
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By Tax Dragon
15th Aug 2022 16:08

I'm off Aweb for a while now, but my immediate thoughts are:
1) I think I have a more tax-efficient suggestion for them;
2) what's the point of NewHoldCo?

[And I guess: 3) there are a lot of transactions there, a lot of disposals, a (partial) cessation, transfer of (some) P&M, the transactions involve shares and securities, there may be losses(?), and 'CGT' was woefully inadequate tagging. I'm not going to give a full response without much more thought (not limited to SSE, NGNL and degrouping, btw)... which probably means even when I come back on Aweb I won't be giving a full response. This type of transaction is much more Dulls's bread-and-butter than it is mine. I need to stop and think - Dulls can just reel off the rules, if so minded.]

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