Company reorganisation examples

Example #1

Preparing for business sale

Challenge:

Selling a trading company that held several investment properties. The shareholders had received an offer to sell the business but wanted to retain their investment properties.

Outcome:

The properties were transferred into a separate company owned by the same shareholders, leaving the trading company to stand alone.

The shareholders are then able to sell the trading company via a share purchase, rather than having to sell the business out of the company. This also made it significantly less disruptive and much more desirable to the buyer, with the added benefit of a higher net proceeds after tax.

Example #2

Split the business between family members

Challenge:

De-merger of a company's business to separate its activities between two family members who wished to go in different directions.

Outcome:

Each family member kept the assets they required and could run the different trade activities in separate companies, independently and freely.

Example #3

Separate premises from trading company

Challenge:

A trading business owns its trade premises from which they operate but has had an offer from a buyer who cannot afford to buy the trade premises as well.

Outcome:

The trading and property activities were separated without incurring a tax liability. Using a ‘demerger’ process there was no corporation tax, capital gains tax, income tax, stamp duty land tax or VAT liability on separation.

The trading company was then sold with the owners retaining the trade premises. The owners were able to claim business asset disposal relief, meaning their first £1m of capital gains were taxed at 10%. The owners were then able to lease the premises back to the purchaser of the trading business.

Example #4

Simplifying of business structure to pass the business onto the next generation

Challenge:

Properties with a significant value were used by the trading business but were held in a separate company, creating issues with passing these to the next generation.

Outcome:

A group was formed with a parent company above the trading company and the property company with the result that the value of the shares in the whole group qualified for relief from inheritance tax but still protected the properties in the event of any issues with the trading business.