The following Corporation Tax guidance note Produced by Tolley in association with Anne Fairpo provides comprehensive and up to date tax information covering:
The commentary set out in this guidance note applies to individuals rather than to the companies involved in the flotation. However, it is important that the impact of the flotation is considered from the perspective of all parties concerned to ensure that it is carried out in the most tax efficient manner, to the extent that commercial considerations will allow.
The flotation of a company does not automatically give rise to a capital gains tax charge in the hands of the shareholders. However, the flotation will generally increase the value of shares held and therefore some planning before the flotation may enable the shareholders to arrange their affairs so as to minimise later tax charges and to allow them to make transfers at lower tax cost, or to ensure that they maintain certain reliefs which have accrued.
Shareholders may wish to provide shares to others, taking advantage of the increase in value on flotation to make the gift more valuable. The key here is to ensure that the transfer takes places in good time before the flotation to ensure that the reliefs are available.
If gifts are made substantially in advance of any flotation, it will be possible to take advantage of the fact that HMRC value minority shareholdings in an unquoted company on a discounted basis to reflect the lack of influence and illiquidity of the shareholding. A gift of a minority shareholding made before any realistic prospect of a flotation may be able to be achieved without a significant capital gain. The recipient will get the benefit of any uplift in value of the shares at flotation.
This is not restricted to disposals by minority shareholders. The value is set by the value received by the recipient of the shares, not by the reduction in value of the transferor. Therefore, a majority shareholder can still gift shares without a significant capital gains tax charge. Note, however, the provisions
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