Corporation Tax

Preparing the group for sale or acquisition

Produced by Tolley
  • 02 Nov 2021 09:21

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Preparing the group for sale or acquisition
  • What are the pre-completion tax issues?
  • Transfer of a trade without a change in ownership
  • Pre-completion transfer of other assets
  • Transfer of intangible assets
  • Transfers at less than market value
  • Pre-completion transfer of stock

Preparing the group for sale or acquisition

What are the pre-completion tax issues?

In many cases, the decision to sell a company is taken over a long period, during which there is an opportunity for pre-sale tax planning. This may be necessary if a purchaser only wishes to acquire certain assets or companies within a group, or the vendor wishes to retain certain assets or companies. This will be a matter for negotiation between purchaser and vendor.

Depending upon the nature of the transaction, there will be a range of tax matters to consider, not least the amount of any tax liability arising on the profit generated by a disposal. This may include the following:

  1. the sale of a company may have implications for income tax, corporation tax and inheritance tax; maximising potential reliefs is likely to be key

  2. the historic tax position and amount of tax losses of the company being sold (target) may affect the price

  3. the sale of the target will have consequences for the group of companies out of which it is sold

  4. the vendors will be required to give warranties concerning the business and assets of the target (including the tax position) and will need to decide how much of the sale price they are prepared to leave outstanding on deferred terms

  5. the vendor will wish to consider the best form of consideration from a commercial and tax perspective

Some of the relevant tax planning considerations are set out below.

Transfer of a trade without a change in ownership

The transfer of a trade between group members is commonly referred to as a ‘hive down’, ‘hive up’ or ‘hive across’, depending upon where in the group

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