Creating a group structure to facilitate a company buy-out as a route to exit.
✓Business asset disposal relief was claimed so gains were taxed at 10%.
✓Tax clearance gained to mitigate income tax liabilities due to their connection.
✓The only other tax cost was stamp duty on the acquisition of shares.
The situation
Parents run a profitable pharmacy business and are looking towards retirement. Money needed to be extracted from the business to fund this but they also wanted to keep the business in the family.
The son also runs a separate business in the same industry which he was looking to expand and so the decision was made to sell the business to the son.
How to structure your family company
Challenges
The son did not have the personal funds available to buy the business directly.
A company purchase of own shares was considered but this would mean that the son would have to become a shareholder within the existing company before he could take over ownership from his parents.
Our solution
Commercially, it was better for the son's company to acquire the shares held by his parents by creating a group structure. Funds could be paid to the parents by way of dividends.
Outcome
The transaction was undertaken achieving the aims of the family in the most cost effective way available.