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It is not uncommon, especially following difficult times faced in the recession, for companies to have diversified into other trades. Whilst this is great for the company for now, helping them to boost profits, should the company later decide to sell one of the trades on it can lead to a significant tax charge in the company as the sale will be of the trade and assets rather than the sale of the shares. This situation may also arise for companies who have always had two separate businesses within a company but as new generations take over it could be that they only wish to continue with one part of it as they lack the experience or interest in other areas.
Careful planning of the structure of the businesses now can result in significant tax savings in the future, but if left too near to the sale, then the opportunity may be lost. The structure needs to be in place for a 12 month period prior to the sale of part of the business, so the sooner the company acts, the better, as it does no harm putting the advice in place now and leaving it in situ.
What You Need To Do Now
We therefore recommend that if anyone has a company with two separate trades within it that they might wish to separate and potentially sell on in the future, they should speak to us about the structure of the company now in order for the planning to be in place should the opportunity for a sale to arise.
Impact on Your Business
The new structure will not change the way that the company operates, in reality there will be only minimal additional administration to deal with, and yet the savings in taxation can be huge. This planning follows the legislation issued by HM Revenue and Customs in relation to business sales and is therefore recognised tax planning practice.
Kerryl Steel, Assistant Tax Consultant
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