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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4096
Experience:  FCCA FCMA CGMA ACIS
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My colleague and I own a Limited Company and we have £2,500

Customer Question

Hi, my colleague and I own a Limited Company and we have £2,500 of £1 shares each which represents all of the 5,000 share capital. The Ltd Co has a loan from a 3rd party of £800,000 and loans from us (directors) of £500,000 (£250,000 each). We have received an offer of £2,200,000 for the Ltd Co. Will our capital gains tax be based on the total proceeds (£2.2m) less the cost of the shares (£5k) or on the net proceeds (£900k being £2.2m less pay back of £1.3m loans)? I assume it is the former but I can't get my head round it!
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

Your assumption is correct, the gain subject to Capital Gains Tax (CGT) will be GBP(###) ###-####- 5000 =(###) ###-#### ***** each. CGT is levied at 18% or 28% or a combination of the two rates depending on your income including the gain in the year of sale. But soft, you are almost certainly entitled to Entrepreneurs' Relief (ER) which limits CGT to a flat rate 10% after you have deducted your Annual Exempt Amount of 11.1K. You can read all about ER here:

https://www.gov.uk/entrepreneurs-relief/work-out-your-tax

I suggest that you will each owe some 109K of CGT after the sale. The repayment of your Directors' Loans is outside the scope of UK taxation. This tax will not be due for payment until 31 January 2017 if you sell in the 15/16 tax year and is declarable on your self assessment tax return in that year.

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

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.