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bigduckontax
bigduckontax, Accountant
Category: Tax
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My brother, my sister and myself are major shareholders in

Customer Question

My brother, my sister and myself are major shareholders in our property company ( established over 50 years) which has substantial property holdings, bank borrowings under £5000, is profitable and successful.
We are all over retirement age but healthy.
My brother and sister have together 54% and I have 46 % shareholding.
They want to retire and I want to continue- I have two very able grandchildren, one nearly qualifying as a chartered surveyor and I want the business to continue.
I have explained to my sister and brother that to sell the properties brings a tax charge on the substantial gains that would be shown (Corp. tax ' 20%) and then 40% income tax charge extracting liquid funds.
Is it possible to split the company into two and then I can carry on and they could then sell their properties in their new company.
What are the likely tax charges to be, if we do this?
What would be your advice, if you were me, as the best, ***** ***** efficient way forward?
Thanks
JLR O'Donnell
Submitted: 8 months ago.
Category: Tax
Expert:  bigduckontax replied 8 months ago.
Hello Mr O'Donnell, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. You are correct that any gain made on the sale of any of the company's properties would be subject to Corporation Tax at 20% as companies are not liable to Capital Gains Tax (CGT), all such transactions passing through the trading account. However, I am at a loss to understand why a charge of 40% tax would be levied should they leave the company, presumably by selling their shareholding, which would attract CGT at 18% or 28% or a combination of the two and if they were going out of the business altogether then possibly Entrepreneurs' Relief which is at a flat rate of 10%. . 0It is perfectly possible to split the company in two as you suggest, but it would count as a disposal and CGT kick in immediately, although Roll Over relief might apply to the retained portion, but this merely postpones the tax. Whichever way this cat jumps there will be a CGT liability. I do hope that I have been able to shed some light on your situation.
Customer: replied 8 months ago.
I have used your service: ask a lawyer and ask an accountant a few times in the past year or so and I have been satisfied by the response.
However, despite framing carefully my question, your tax expert has not answered it correctly or fully.
If money is taken out of a company, apart from dividends it has to be taken as salary and tax at 40% could apply.
Your expert seems puzzled by this.
Also, there is an answer to my question which, legally allows us to solve our problem with only legal fee costs and no taxation applying.
Therefore, I am no further forward and I wish my fee of £46 returned.
Yours sincerelyDr JLR O'Donnell
Expert:  bigduckontax replied 8 months ago.
If funds are distributed by the company other than by dividends or the repayment of loans by shareholders than they may well be subject to Income Tax in the hands of the recipients. Whether that is at 20% or 40% depends upon individual circumstances. I am not the slightest bit puzzled, it is the questioner who appears confused. I have explained what happens in the event of the company being split as suggested by the questioner. If you wish to have your fee refunded you must apply to Just Answer Administration for it to be returned.
Customer: replied 8 months ago.
You are just repeating points I put in my question so I know no more than when I first contacted you.
Please refund my fee.
Thanks *****'Donnell
Expert:  bigduckontax replied 8 months ago.
Please see my previous post. You must request a refund from Just Answer Administration.

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