Company client has been trading for some years but is looking to stop due to ill health. There are trading losses of approx £150k and a credit balance on his loan account of approx £250k. If the new owners continue with the same (or very similar) trade, I assume that they can utilise the losses but not sure if they can make use of the loan account? If the diretor were to "gift" this to the new director, are there any immediate tax implications (I think it will be a PET for IHT but I'm not immediately concerned with that due to 2 NRB's and 2 RNRB's available)?
This is very early days and no money has been discussed but I can see value in the losses but not sure about the loan account.
As always, thanks in advance
Replies (7)
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Why would he want to gift anything? Surely he is out to get the best price for what he is selling. The loan is an intrinsic part of the negotiations leading to the sale of the shares.
What do you think the potential purchaser means by "cannot use"? Would they rather he kept it then?
He should sell the shares for £X and the benefit of the loan account for £Y.
NB Y will be significantly less than c£250k as the repayment isn’t assured. I had a client who was recently the buyer in a similar scenario and was going to buy the shares for £100k with a £2.5m loss, then an additional £100k for a £3m loan account.
The buyer will need to be careful with the b/fwd losses and a change of control
https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm06300
Surely when he ceases to be a (the) participator in the company the company will owe him £250k which will affect the value of the company when he sells it and that is that. He can gift the loan but equally he can waive his entitlement to receive it