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bigduckontax
bigduckontax, Accountant
Category: Tax
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I am merging my small company with another competitor. The

Customer Question

I am merging my small company with another competitor. The deal is that along side a wage he "buys" my shares of 50% out of any profilts at £5000 per month until £240.000 has been acheived. How do I stand froma tax point of view
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

You will be liable for Capital Gains Tax (CGT) on the gain made from the sale of the shares in your business. CGT liability occurs only once on the whole gain as at the initial date of sale. Under s280, TCGA, 1992 you can apply to HMRC for clearance to pay by installments over a maximum 8 years, but you will need to show HMRC that you would suffer undue hardship if you paid your tax off all in one tranche. You would be entitled to the normal annual exempt amount, currently 11.9K, and you may be entitled to Entrepreneurs Allowance (EA) as well to offset the gain. GCT is levied at 18% or 28% depending upon your personal income level, but EA limits it to 10%.

It may be adviseable in the light of the sums involved to approach a local, trusted accountant to act on your behalf with HMRC.
Customer: replied 3 years ago.

Good Morning,


 


Does this mean that I will be able to invest my monthly payments and then only the the tax due when the sale is complete in 4 years time


 


Thank you

Expert:  bigduckontax replied 3 years ago.
The tax will be due on the whole gain as at the first date of the sale. The fact that you receive the money in installments later is irrelevant as far as CGT is concerned. You can apply to stagger payments over a maximum of 8 years, but only if you can demonstrate hardship. Any surplus cash flow may, of course, may be invested. Interest gained is subject to Income Tax.

I am sorry to have to be able to tell you that you can't put the tax off until the final completion date.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.