Tip of the Week – 07/06/2021

Selling a business?

The substantial shareholdings exemption broadly provides that a gain on the disposal by a trading company of a 10% or greater shareholding in another trading company will not normally be a chargeable gain, and that means no tax.

There are several detailed conditions which we will not cover here but it should be borne in mind that if a company wants to sell a part of its business and wants to make use of this exemption, it could set up the trading subsidiary preferably at least 12 months in advance to enable the business to be transferred down to the subsidiary before the sale of the subsidiary.

On that basis, it would be prudent to ensure that where a standalone trading company is likely to dispose of a trade at some point in the future, consideration should be given to creating a subsidiary sooner rather than later.

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