Hypothetically speaking:
Individual bought eis shares five years ago at £100k
Current valuation £500k based on upcoming fund raise
Selling to his company allows the individual to extract £500k from the company (£400k in profits) without any tax liability due to no cgt on eis shares.
The company would pay ct if the shares were sold in future at a profit or claim a loss of sold at loss.
The biggest thing the sale achieves is cash flow for the individual’s personal use allowing them to take advantage of the cgt exemption despite difficulty finding buyers for the eis shares
Provided an otherwise unconnected investor buys shares at the value proposed by the business, I would consider that as good an indication of value as you can get.
Thanks for the reply. The eis business is proposing the funding round but it’s yet to materialise and could take months. Meanwhile if the investor sells to his own company :
Could it fall under GAAR?
Is It possible to apply to HMRC for pre approval, as the cgt saving will be substantial?
My answers
Hypothetically speaking:
Individual bought eis shares five years ago at £100k
Current valuation £500k based on upcoming fund raise
Selling to his company allows the individual to extract £500k from the company (£400k in profits) without any tax liability due to no cgt on eis shares.
The company would pay ct if the shares were sold in future at a profit or claim a loss of sold at loss.
The biggest thing the sale achieves is cash flow for the individual’s personal use allowing them to take advantage of the cgt exemption despite difficulty finding buyers for the eis shares
Thanks for the reply. The eis business is proposing the funding round but it’s yet to materialise and could take months. Meanwhile if the investor sells to his own company :
Could it fall under GAAR?
Is It possible to apply to HMRC for pre approval, as the cgt saving will be substantial?