Share sale scheme

Our client Mr A has a successful trading company X Ltd. Unfortunately he is a rather big spender and his director’s loan account is very much in debit. So much so that voting a dividend (for example) to clear it would involve an unthinkable amount of personal tax.

Mr A owns a parallel company Z Ltd which is also successful. He has suggested to us that one way of clearing his X Ltd loan account would be for him to sell his Z Ltd shareholding to X Ltd for a reasonable price.

The proceeds from the share sale would then be used to clear the loan account; there would be an attendant capital gains tax liability although this should attract entrepreneurs’ relief. Is this in any way feasible?

We would appreciate readers’ thoughts before...