Structuring a deal

[Seany88]

If a limited company is taking over another limited company, what is the best way of structuring this to minimise tax for both parties concerned?

I understand the seller should look to qualify for Entrepeneur's relief by selling the shares, making it 10% tax.

Meanwhile the buyer would want to buy the assets for capital allowance purposes, is that right?

Can anyone give some insight into any other options? How do Mergers and Aquisitions in the corporate world work? Or is it going to be a hit one way or the other?

[Seany88]

anonymous said:

[redacted]

I was hoping you'd reply tonker, as from what I've read in the past you seem involved in a lot of these sort of things.

What do you mean wedded? Its a bit of a family situation in that the seller is family so want something that's good for both of us but at the same time for the sake of my business I don't want any previous liabilities to come haunt me!

[wattsm666]

I am not sure what value of transaction you are talking about here, but you should seek advice from your accountant. There are lots of different factors to consider, which will then impact on the price offered. Goodwill vs shares is a big topic for debate and is not just down to tax and any other liablities that may come out of the woodwork.

[Seany88]

I don't mind about possible liabilites really as I'd like to think family would be honest enough folk etc.

I do want it to come under the same company for buying power purposes and to bring it all together under a single brand.

So I guess i'm mainly asking about minimising the tax that will arise on the sale while not shooting my own company in the foot further down the line...

[wattsm666]

You should seek advice before you put an offer forwards, I have seen deals put forwards then advice is sought and it can be very difficult to back track if the wrong route has been chosen and put to the vendors.

[Size Nine Elm]

While minimising tax, don't let this goal cloud other issues - no point in tying yourself in knots to avoid the tax if overall it would be simpler paying some tax...

[DavidHM]

Seany88 said:

I don't mind about possible liabilites really as I'd like to think family would be honest enough folk etc.

I do want it to come under the same company for buying power purposes and to bring it all together under a single brand.

So I guess i'm mainly asking about minimising the tax that will arise on the sale while not shooting my own company in the foot further down the line...

Thing is, while the family may be honest, there may be unforeseen liabilities because things don't turn out as planned. As a result you may find yourself carrying liabilities that arise in future when you don't need to - so it's not just about the family's honesty but doing what protects you without polluting the business.

Secondly there may be a good argument for buying together and building a brand but the new business could form part of a group structure, or acquire bulk bought goods/services and licence the brand from another company, without having to tie up all the assets and liabilities in one pot.

I really think you need advice on this to prevent you from being bitten in future. Tax is obviously a consideration, but as stated above, it's not the only one, especially not for you as the buyer.