How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask bigduckontax Your Own Question

bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3113
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

I am a 50% shareholderof a small limited company business and

Customer Question

I am a 50% shareholderof a small limited company business and my business partner has expressed a wish to buy me out. We have property of 500k and approx 200 k pa gross profit. The business is a freight forwarding company and we sell services only.
i am trying to find out both a rough valuation for this type of business but more importantly the tax implications personally as a 52 year old.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

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

You will be liable for Capital Gains Tax on the gain you make on the sale of your shares to your business partner. This sale will be at full market value to satisfy HMRC. You will almost certainly be entiutled to Enretpreneure'

Expert:  bigduckontax replied 1 year ago.

Sorry my PC crashed and I am continuing.

Entrepreneurs' Relief which limits the taxation to a flat rate of 10% as opposed to the normal 18% or 28% depending on your income including the gain in the atx year of sale.

The value of the business is perfectly simple and as long as the proverbial piece of string. It's theoretical value is irrelevant; it is worth what a purchaser is prepared to pay for it. At a rough stab it would be worth the current property value plus an appropriate number of years purchase of the turnover. Here is a general guide from IFS Proshare as to how unquoted companies might be valued:

https://proshare.ifslearning.ac.uk/docs/default-source/sip-saye-surveys/vaultaion-of-shares-fact-sheet.pdf?sfvrsn=0

I do hope that you have picked up this rather disjointed response.

Customer: replied 1 year ago.

Hello, on reflection the valuation question should not be posed to you as

a tax person.? do you know of some one who could give a more accurate answer in this field? On the entrepreneurs relief question what information do you need from me to give a more definitive answer?

Expert:  bigduckontax replied 1 year ago.
As it happens I am a Chartered Certified Accountant, a Chartered Management Accountant a Chartered Secretary as well as holding an international cost accounting qualification. I have also attended a course in the valuation of un-quoted companies where the lecturer's first words were those including 'What a buyer is prepared to pay for it!'
Here is the Gov UK's guide to eligibility to Entrepreneurs' Allowance:
'You’ll qualify if you dispose of any of the following:
All or part of your business as a sole trader or business partner - including the business’s assets after it closed
Shares in a company where you have at least 5% of shares and voting rights (known as a ‘personal company’)
Assets you lent to your business or personal company
If you’re selling all or part of your business
All the following must apply:
You’re a sole trader or business partner
You’ve owned the business for at least one year before the date you sell or close it
You sell or dispose of your business assets within 3 years after selling or closing the business
If you’re selling shares
All the following must apply for at least one year before you sell your shares:
You have at least 5% of shares and voting rights in the company
You’re an employee or director of the company (or one in the same group)
The company’s main activities are in trading (rather than non-trading activities like investment).'
From the information you gave me in the question there is little doubt that you would be entitled to this very valuable allowance.
Customer: replied 1 year ago.

I wasn't inferring anything, but thought you may have a better idea. Presume someone must be able to give me a ball park figure relating to service businesses. Note some valuations are based on gross profit but i just don't know how to get a basic idea and presume someone would come up with a figure if i wanted to sell?

On the tax question - does business partner mean of a limited company?


Just for clarification if my part of the business was sold for 500 k would Capital Gains be 50k and nothing else? Could i sell the goodwill only of the business secured on a loan to the company over 10 years to limit my liability to tax? eeeeedddd just for clarification if the busi

Expert:  bigduckontax replied 1 year ago.
Here is what I said about shares. You are a 50% shareholder and this is what you will be selling if your other shareholder buys you out: So this is the position regarding the relief:
'If you’re selling shares
All the following must apply for at least one year before you sell your shares:
You have at least 5% of shares and voting rights in the company
You’re an employee or director of the company (or one in the same group)
The company’s main activities are in trading (rather than non-trading activities like investment).'
The Capital Gains tax would not be 10% of the selling price, but 10% of the gain made on the sale. You must deduct the original cost of the shares.
On valuations here si some general advice from www.cobaltcf.com:
'• A typical P/E ratio for a large, growing quoted company with excellent prospects might be up to 20.
• Their shares are much easier to buy and sell. This makes them more attractive
to investors than shares in comparable unquoted business.
• Typically the P/E ratio of a small, unquoted company is 50 per cent lower than that of a comparable quoted company in the same sector.'
This might indicate that a maximum valuation would be 10 Y?P. However, a great deal depends upon the sustainability of the business. Will it be so successful with one participator gone? 10YP of the current profit is 2 million, maybe a tad high. 5YP might be more realistic or maybe even less if the business volatility is high.
Customer: replied 1 year ago.

Thank you Keith that is very helpful. In your opinion would the business value revert to multiples of gross profit if sold as a whole? The business would run quite smoothly without myself and the customer base is of a longstanding nature, so 4 times earnings would still be a fair settlement?

My initial share price is listed as 10 pounds so i would pzy 10 percent of the sale.

i have another question about holiday lettings can i ask you that on this thread?

Expert:  bigduckontax replied 1 year ago.
Your CGT would be based on the net selling price of your business share (ie after valuation fees and other costs etc) less your original ten quid; effectively you would pay tax at 10% of the selling price you received.
I would venture that 4YP might be a tad niggardly; I would tend to hold out for five. However, if the company's clientele are also approaching retirement then four might be realistic.
I am sorry, but the holiday lettings are a totally different subject and Just Answer protocol requires me to request that you make this inquiry an entirely new question.
Please be so kind as to rate me on this question before you leave the Just Answer site.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3113
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Previous | Next >
  • http://ww2.justanswer.com/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.com/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    2333
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.com/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    524
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2845
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.com/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    270
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.com/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions