Retiring shareholders

Two clients and their wives own a construction company with equal shareholdings between the four of them. The business has accumulated cash reserves and retained profits of about £1m.

One couple wishes to retire from the business while the other would like to carry on working for some years. The nature of the business is such that their customers have a retention for up to two years on work completed.

The intention is that the remaining couple will form NewCo and start to trade in October on new contracts. OldCo will continue to trade until the end of December and will then be placed in a creditors’ voluntary liquidation. Interim payments on account of the winding-up will be made over three years while the retentions are gathered in and any residual costs paid.

The plan is that all four shareholders should be able to benefit from capital gains tax entrepreneurs’...