The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
The consideration received by an individual on disposal of their shares in a company will often be simply in the form of cash. However, there may also be some form of deferred consideration, which is often used as an incentive to tie key individuals into continuing to work for the business after the disposal for a certain period of time. In such cases the deferred element of the consideration may be quantified at a later date, typically formula based on two / three years post acquisition profits. An arrangement such as this is known as an 'earn out'.
The way in which the consideration for the sale of shares is structured determines when the capital gains tax falls due. There are special rules allowing the payment of tax in instalments in certain circumstances, which are covered at the end of this guidance note.
It should be noted that most of the commentary in this note relates to the tax position of the individuals involved in a share sale, rather than the companies. It is important that the directors and their advisers understand the tax position of the individuals involved in a transaction as this may impact the way in which the transaction is structured. However, it is recommended that each party involved obtains their own tax advice tailored to their specific circumstances.
The basic rule is that the date of disposal for capital gains tax is the date when there is an unconditional contract for sale. If a contract is conditional on a condition precedent, the date of disposal for CGT purposes is the date that all of the relevant conditions have been fulfilled. A condition precedent is an external condition, eg a contract for sale of land may be conditional on planning permission being granted. A condition subsequent is a condition between the parties to the proposed sale and does not trigger a disposal date for CGT purposes.
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
The substantial shareholding exemption (SSE) provides a complete exemption from the liability to corporation tax on the gains generated from qualifying disposals of shares and interests in shares by qualifying companies. Conversely, if losses are generated by the disposal and the SSE conditions are
IntroductionUK tax must be withheld on UK payments including:•interest•royalties•rental incomeWithholding tax may be reduced under double tax treaties (DTT) or European directives, both of which may be subject to making a formal claim.This guidance note outlines the rules for UK withholding tax, and
Terminal loss relief for trade losses in the final 12 monthsTrading losses incurred by a company in the final 12 months leading up to the discontinuance of trade may be carried back for up to three years from the period beginning immediately before that 12-month period. So if the final accounting
The corporate interest restriction (CIR) essentially limits the amount of interest expense a company can deduct from its taxable profits if the interest expense is over £2 million. The actual mechanics of the CIR calculation are highly complex (the legislation is over 150 pages long) and are
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.