The assurance I’m after is that there are no rules or laws that prevent this. I know that the £40k limit is relevant to personal tax years, but wanted some reassurance that there wasn’t anything that prevented 2 payments x £40k in situations where the FY and tax year are not in sync.
In this specific case, for a company with FY running July-June, can a £40k payment be made July 1st and then again on May 1st….so 2 payments in one FY but different tax years.
As I said, fairly certain that it’s fine as I can’t find anything that says otherwise.
No this is definitely not what I’m advising. I’ve advised the client to try to sell his business instead of just closing the doors but he doesn’t want to. He could sell it for a million or so, then clear the interco loan. It’s a profitable business. But he doesn’t want to and so this leaves an interco loan that needs to disappear one way or another. So at this stage I’m just weighing up his options and seeing what will be the best for him.
Thank you Tax Dragon, I'll get a look at CFM35000.
No nothing is being avoided (at least nothing intentionally).
Re "moving value...increase the potential tax?", would you mind expanding on that if you don't mind? Do you mean from a CGT point of view?
I had thought about whether it was a distribution, that was my worry, but I couldn't find a definitive answer anywhere. I had read discussions on here regarding similar situations and the general view is that there would be no impact on any tax....which I didn't feel comfortable relying on.
If I had found the answer in HMRC manuals then I wouldn't be posting in a forum. If you can point me towards a specific manual that answers all, or some, of my questions then that would be fantastic.
From my knowledge and understanding, I believe that there would be no CT or CGT impact. But a second opinion is always a good thing.
Maybe consider the FRS as this may be more favourable to you (depending on the costs you incur). You might not need to increase prices too much in order to maintain your current margin
No I don’t think there has been a transfer of Value. The sellers are selling back 49% of shares to the company, the remaining shareholders will now essentially jump from 51% to 100%. But the business will be valued the same (less the cash used to fund the buy back). I’m possibly misinterpreting what you mean by “transfer of value” though
So just ensure that SH03 and SH06 are completed. and stamp duty paid? It's not an exempt distribution as the shares have only been held for 3.5 years so no need for clearance from HMRC?
At present, the holding company does not have enough distributable reserves to make the purchase but the plan is to pay interco dividend from subsidiary in order to provide funds....would that be be an ok way to go about this?
My answers
There are no unused allowances to carry forward
The assurance I’m after is that there are no rules or laws that prevent this. I know that the £40k limit is relevant to personal tax years, but wanted some reassurance that there wasn’t anything that prevented 2 payments x £40k in situations where the FY and tax year are not in sync.
In this specific case, for a company with FY running July-June, can a £40k payment be made July 1st and then again on May 1st….so 2 payments in one FY but different tax years.
As I said, fairly certain that it’s fine as I can’t find anything that says otherwise.
No this is definitely not what I’m advising. I’ve advised the client to try to sell his business instead of just closing the doors but he doesn’t want to. He could sell it for a million or so, then clear the interco loan. It’s a profitable business. But he doesn’t want to and so this leaves an interco loan that needs to disappear one way or another. So at this stage I’m just weighing up his options and seeing what will be the best for him.
Thank you Tax Dragon, I'll get a look at CFM35000.
No nothing is being avoided (at least nothing intentionally).
Re "moving value...increase the potential tax?", would you mind expanding on that if you don't mind? Do you mean from a CGT point of view?
I had thought about whether it was a distribution, that was my worry, but I couldn't find a definitive answer anywhere. I had read discussions on here regarding similar situations and the general view is that there would be no impact on any tax....which I didn't feel comfortable relying on.
Sorry, what does Tis mean? :)
No it's not a trade debt. It was an interest-free loan so that the property company had funds to purchase investment property
If I had found the answer in HMRC manuals then I wouldn't be posting in a forum. If you can point me towards a specific manual that answers all, or some, of my questions then that would be fantastic.
From my knowledge and understanding, I believe that there would be no CT or CGT impact. But a second opinion is always a good thing.
Maybe consider the FRS as this may be more favourable to you (depending on the costs you incur). You might not need to increase prices too much in order to maintain your current margin
No I don’t think there has been a transfer of Value. The sellers are selling back 49% of shares to the company, the remaining shareholders will now essentially jump from 51% to 100%. But the business will be valued the same (less the cash used to fund the buy back). I’m possibly misinterpreting what you mean by “transfer of value” though
So just ensure that SH03 and SH06 are completed. and stamp duty paid? It's not an exempt distribution as the shares have only been held for 3.5 years so no need for clearance from HMRC?
At present, the holding company does not have enough distributable reserves to make the purchase but the plan is to pay interco dividend from subsidiary in order to provide funds....would that be be an ok way to go about this?
Interested in what this "textbook" way is :)
The business is suffering due to conflicts between the shareholders, that's the long and short of it. It's having a detrimental impact on the business