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In the first of a series of four articles from Burges Salmon relating to the sale of shares in private companies, JOHN BARNETT ATII, solicitor suggests some pre-sale tax planning ideas affecting individual vendors.
THIS ARTICLE CONSIDERS points relevant to an individual vendor before the sale of the company completes. Later articles will look at similar issues for corporate vendors, the contractual documentation and the purchaser's position. All references are to Taxation of Chargeable Gains Act 1992 unless otherwise stated.
Problem solved, as explained by JOHN BARNETT with regard to a share buy-back difficulty.
AS THE PAGES of Taxation magazine have testified over the years, the taxation of companies repurchasing their own shares — while deceptively straightforward — is often fraught with difficulties. Most such problems seem to be caused by an incomplete understanding of the company law issues involved in a share repurchase and the effect that these can have on the tax treatment.
Tax rewrite
I recently wrote to HMRC asking whether the wording of ITTOIA 2005, s 397(1) had changed the meaning of TA 1988, s 486 (1). The reference to 'share interest ... payable by a registered industrial and provident society (IPS)' has been replaced by 'payment to a shareholder in such a society'. Potentially this could cover, for example, a payment by one member of the IPS to another.
Confirming that the wording had not changed the interpretation, HMRC gave this explanation:
JOHN BARNETT continues his practical guide to the enterprise investment scheme.
HIS IS THE second in a series of three articles looking the enterprise investment scheme from a practical point of view. The first article looked at why enterprise investment scheme applications can go wrong. This article will look at the practical steps which can be taken at the outset to try to ensure that they do not. Statutory references are to Taxes Act 1988, unless otherwise specified.
To get actionable insight and practical guidance to support you day-to-day on 'Conditions to be met by the EIS investor' click here.
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JOHN BARNETT offers readers a practical guide to the enterprise investment scheme.
