Taxation magazine queries ― capital extraction of profit

Produced by Tolley

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Taxation magazine queries ― capital extraction of profit
  • Treatment of income arising from share sale
  • Details of the query as copied from Taxation magazine
  • Link to responses
  • Tax treatment of a property company distribution
  • Details of the query as copied from Taxation magazine
  • Link to responses
  • Cessation of trade and availability of business asset disposal relief
  • Details of the query as copied from Taxation magazine
  • Link to responses
  • More...

Taxation magazine queries ― capital extraction of profit

The following guidance note provides details of queries raised on the extract of profit on the winding-up of a company in the last few years in the Readers’ Forum section in Taxation magazine with a link to the full replies. It should be noted that the response to the queries is at a point in time and all relevant legislation should be confirmed as being currently applicable.

Treatment of income arising from share sale

Details of the query as copied from Taxation magazine

My client is a shareholder in a special purpose company that was established three years ago to develop a property. His shares cost £400,000 and are currently valued at £800,000. He also loaned £2m to the company. The project is nearing completion and the loans will be repaid with interest in the near future. One of the other shareholders is interested in acquiring my client’s shares, which would suit my client because it appears to secure him capital gains tax treatment for his profit without waiting until that is possible on a share buy-back (another two years) or requiring the liquidation of the company. I am concerned that there might be something that would nevertheless deem the £400,000 profit to be a distribution in my client’s hands or would create a tax problem for the other shareholder (which the client would not countenance). Can readers provide reassurance, or point out the pitfalls to watch for?

Link to responses

See ‘Capital exit’ in Taxation, 7

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