Hi All,
Hope all is well. I am looking into ways to do this! There are 4 companies within a group with a single Shareholder/director as below
Company A - Mr X Shareholder (100%) formed in Jan-21 - £1-1 share
Company B - Mr X Shareholder (100%) formed in Jan-21- £1-1 share
Company C - Mr X Shareholder (100%) formed in Jan-21- £1-1 share
Company D - Mr X Shareholder (100%) formed in Jan-21- £1-1 share
Ideally, Company D will replace as RLE in Co, A,B & C (Parent/Subsidiary set up) and Mr X will remain as the 100% shareholder in Co D. The issue is, Company A, has generated about £40k per month from Management services this year post incoporation, where as Co B and C are still dormant, so share transfers can be done @ £1each. Also Co A has obtained a bank loan for its actual trade to be paid into next year, so what are the implication if we change the structure now?
Question is does it require a valuation of Co A at this point for Co D to be the RLE or can it be back dated effective Jan-21 without trigerring any Tax implication? What I'm thinking is, to value Company A at present, then do a share transfer to Co D which will trigger Capital gains for Mr X and Stamp duty for Company D or we can simply back date this on Companies house now to Jan-21 and Remove Mr X from Co A, B and C and attach Co D to these companies to make Co D Parent?
Not sure if I have explained correctly, but If someone can clarify will be greatful.
Kind regards
MS
Related resources
Replies (10)
Please login or register to join the discussion.
Also Co A has obtained a bank loan for its actual trade to be paid into next year, so what are the implication if we change the structure now?
Firstly what does "obtained a bank loan for its actual trade to be paid into next year" even mean?
Secondly, you may find a change in the company's ownership is a repayment event for this bank loan. Inserting a parent company with the same ultimate shareholder may not be a 'real change' but legally it is and so may be worth getting the bank's blessing before doing this.
Thank you for the response, its much appreciated.
Firstly what does "obtained a bank loan for its actual trade to be paid into next year" even mean? - Apologies, I meant to say, the loan is approved by the bank, but the draw down will only happen next year as with covid things have slowed down. I thought of the same tbh to get the concurrence from bank in the first place.
Onto the real question, which way is the safest? Back date the parent Co effective Jan-21 or value Co A as it stands and do the share transfer to Co D?
Many thanks
MS
Many thanks for the response.
I think, the main reason he prefers a group is because, he wants to issue further shares etc of various classes to his family members through Co D and his main reason is he has seen how a group company can be beneficial in future if the business does grow, this is what one of his friends did. Also he intends to use Co D to be the RLE Co if he decides to invest in other businesses going forward, rather than putting him down. I did explain to him, there will be requirements to do consolidated accounts if a group structure if formed, which will be hefty for him.
Perplexing to say the least!
Many thanks
MS
Last time I had a cllient with such grandiose ideas I told her how much the fees were likely to be
She sacked me (more accurately, did not want any work done) but I noticed 3 out of four companies struck off very quickly
So she did follow my advice despite getting no bill for the advice.
Thank you for the reply.
I have to agree, its a mess to change once it starts. I just wondered why he didn't take a company structuring advice right at the start which would have been easy for him.
Is there any other way you can think of to untangle this mess to achieve a Parent Co?
Many thanks
MS
You don’t seem to have considered share for exchanges as a way of forming the group, which may well solve all of your tax issues at one fell swoop.
Thank you for the reply John.
Tbh that didn't even cross my mind. Do you recommend using a specialist firm for getting HMRC clearance?
Once again thank you for the great resolution!
Many thanks
MS
If it is not within your field of expertise, as it wouldn’t be within mine, yes you should seek tax specialist advice on clearances, and on the tax implications of the transactions generally, elsewhere.
Many thanks John for the valuable suggestion, I will certainly seek expert advice.
Many thanks
MS