Share swap or Company buy-back?

Two limited companies with the same two directors and equal shareholdings.

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Both directors/equal shareholders wish to separate and retain 100% control of their respective company. What are their options?

I believe this can be achieved by a company buy back of shares & CGT on disposal of their respective shares.

Alternatively, is it possible to undertake a share swap/exchange? Defer stamp duty & hold-over any CGT?

Any guidance would be appreciated.

Replies (7)

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By Accountant A
08th Apr 2019 12:00

If you are an adviser, you should refer the client to someone familiar with this type of transaction.

If you are a client, you should speak to your accountant.

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Replying to Accountant A:
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By Tax Dragon
08th Apr 2019 13:36

When I saw this question, I had a private bet with myself that you would be the first to answer. A side bet (placed each way) concerned what you would say.

I won. Twice.

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Psycho
By Wilson Philips
08th Apr 2019 12:15

I don't see how a straightforward exchange/swap would allow deferral of either Capital Gains Tax or Stamp Duty.

In theory, buybacks would seem to be the most straightforward although there are a number of issues to consider, which cannot be done here in absence of relevant information.

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By Stephen Vaughan DMJ
08th Apr 2019 12:28

My guess is that the OP is in practice - why not ask your boss for help?

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By Matrix
08th Apr 2019 12:41

Buy back if conditions met (5 years etc to get CGT treatment, sufficient reserves, cash etc).

This would involve paperwork, CH filings, HMRC clearances so increased professional fees.

Depending on the amounts involved they could just transfer the shares to each other. Obviously the payments would be made out of post tax income.

There may be alternatives, could they gift them to eachother and claim holdover relief? What are the respective values?

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Replying to Matrix:
Psycho
By Wilson Philips
08th Apr 2019 12:55

Would HMRC accept that there are 2 separate outright gifts involved? I should have thought that they would seek to argue that there is consideration in the form of the shares being received. So no holdover.

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Replying to Wilson Philips:
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By Matrix
08th Apr 2019 13:19

I have no idea, I don’t normally reply to anonymous posters who may or may not be accountants but, if I was the adviser, I would look at the amounts involved and see if it is worth looking into all the options.

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