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bigduckontax, Accountant
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I am considering a sale of my Czech company to the UK company

Customer Question

I am considering a sale of my Czech company to the UK company and having the UK company then act as the the holding company or group company.
There are a number of beneficial reasons to do this from the Czech end which I have already sought accounting and legal advice.
One of the primary motivations for doing this now ( selling the Czech company to the Uk company) is that now I have owned the Czech company for more than 5 years any monies I receive from the sale of my shares is tax free.
It will also make the business in Czech and Poland look more substantial and prestigious.
thirdly - being the owner of the Czech company exposes me to ultimate liability in the event of a law suit and the costs of indemnity insurance are considerable here and I have not been insured until now.
The Czech company has had a revenue of 400-600k euros each year for the least 5 years.
I do also own an offshore company (Belize) that could also be the ultimate holding company of the UK company and subsidiaries.
I am seeking advice on the above from a transaction and tax perspective.
Note:
I am the sole owner of all the companies.​
The UK company does not have the funds available to pay for my shareholding
I want to increase tax efficiency and not to raise my costs of doing business substantially.
I want to process the transaction as soon as is practically possible based upon best advice.
Happy to have a short call so that you may raise other questions with me proceeding with written advice.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I'm Keith and happy to help you with your question.

The disposal of your Czech company would normally expose you to UK Capital Gains Tax (CGT) on any gain you make.

It is likely that you would be entitled to Entrepreneurs' Allowance (EA) which reduces the rate of tax to a flat 10% on any gain over your Annual Exempt Amount (AEA) of 11K [14/15 rates]. EA must be claimed with about 2 years eg 14/15 tax year by 2016. However, you may be able to defer paying this tax through Incorporation Relief. To benefit from this you must [Gov UK advice}:

'You may be able to delay paying Capital Gains Tax if you transfer your business to a company in return for shares. Incorporation Relief means you won’t pay any tax until you sell (or ‘dispose of’) the shares.

Eligibility

To qualify for Incorporation Relief, you must: be a sole trader

or in a business partnership transfer the business and all its assets (except cash) in return for shares in the company'

through which your payment is deferred. Your entitlement to AEA will still be there should you require same. No funds will be needed immediately pursuant to this transaction.

This answer does not consider any effects that the transaction may generate under the Czech taxation regime. Ant tax paid there would be allowed as a tax credit against any UK tax liability on the same transaction under the Double Taxation Convention which has been entered into to preclude such levies being made in both jurisdictions.

I do hope I have been able to shed some light on your position.

Customer: replied 2 years ago.

Thanks. I forgot to mention that I am not a UK tax resident. I live in the czech republic.

In this case there would be no CGT payable correct?

Expert:  bigduckontax replied 2 years ago.

Well that rather does change things somewhat! In such a case you would not have any UK CGT liability unless, in the year of sale, you had spent more that 183 days resident in the UK.

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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3396
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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