Buy-out fallout

Buy-out fallout

We act for a company X Ltd and its majority shareholder Mr X. Mr X owns 65% of X Ltd and until recently Mr Z owned the other 35%. The company has some trading activity but the majority of its profits derive from property rental.
Following a disagreement Mr Z required that he be bought out of the company. Mr X did not have the funds personally but the bank was prepared to lend funds to X Ltd secured on the property portfolio. Because the company was not considered to be a trading company a new company (Y Ltd) was set up to acquire Mr Z's shares. The funds to acquire the shares were borrowed from the bank by X Ltd and lent to Y Ltd. Following this Y Ltd duly purchased Mr Z's shares. HMRC contend that TA...