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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 14346
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Assistant: How can I help? can i sell one business that i

Customer Question

Hi,
Assistant: Hello. How can I help?
Customer: can i sell one business that i own 100% to another business that i own 100% and obtain the 10% rate rate for the sale of the business?
Assistant: Have you talked to a tax professional about this?
Customer: yes but they are out of the office for a few weeks and i need a quick answer
Assistant: Anything else you want the Accountant to know before I connect you?
Customer: yes, there will be some other matters surrounding this
Submitted: 6 days ago.
Category: Tax
Customer: replied 6 days ago.
Business A has been trading for over 12 months and has approx. 50k in the bank.
Business B has been trading for approximately 10 months and has roughly 1.5m in the bank.
Both are currently owned 100% by the director. both UK based.
My question is this:Can I sell company A to company B for 1.5m and only pay 10% entrepreneurs relief on the sale? Also, do I have to sell 100% of the shares? Can I sell only 25% or 50% for this sum?
The market value of company A would be 1m to 2m.
Expert:  bigduckontax replied 6 days ago.

You only have to sell some of the business to claim Entrepreneurs Relief (ER). The rules are here:

https://www.gov.uk/entrepreneurs-relief

I will opt out, I am unwell.

Expert:  Sam replied 6 days ago.

Hi

No

As business one will still trade with you in Business two so you will not qualify for entrepreneurs relief, but you can sell what ratio you wish to but there will then be capital gains if a sole trader and corporation tax and income tax as a limited company

Thanks

Sam

Customer: replied 6 days ago.
what do you mean by this? "As business one will still trade with you in Business two so you will not qualify for entrepreneurs relief," both business are currently independent of each other. both with seperate customer bases. Plan would be for one business to sell its shares to another and takes on the new customers. then i guess it would continue trading under a the purchasing company.
Expert:  Sam replied 6 days ago.

Hi

You are affiliated with both and plan to sell one to the other

Thanks

Sam

Customer: replied 6 days ago.
What if company a was sold to company b then company b was sold externally 2 months later so I was no longer connected?
Expert:  Sam replied 6 days ago.

Hi

That would then be an act of tax evasion and I am sure you can appreciate I am unable to comment on that

Thanks

Sam

Customer: replied 6 days ago.
Wow. I didn't realise that. This is a commercial transaction that I want to structure as tax efficiently as possible. Hence asking for advice. I don't want to break any laws. I dont feel my question has been answered.
Expert:  Sam replied 6 days ago.

Hi

You are trying to gain a lesser tax charge for which you are entitled for the reasons I have advised upon the only way to create an entitlement is to sell both A and B as a non connected sale to a non connected purchaser to be even be considered for Entrepreneurs relief on both sales.

Then you also have to meet the remit as follows

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 or securities in a company where you have at least 5% of shares and voting rights (known as a ‘personal company’)
  • shares you got through an Enterprise Management Incentive (EMI) scheme after 5 April 2013
  • assets you lent to your business or personal company

I do not see why your question has not been answered ?

If you wish me to opt out I am happy to do so - and another expert can assist you. just let me know

Thanks

Sam