The director of a group of solvent companies
A director sought our help to extract the value of his shares in the group in the most tax-efficient manner possible.
What was the issue?
The director of a group of solvent companies approached Bailey Ahmad when he decided to sell the group’s multiple business interests with a view to his retirement. He sought our help to extract the value of his shares in the group (around £550,000) in the most tax-efficient manner possible.
How we advised and helped
We recommended placing all three companies into MVL with a view to making a capital distribution to the shareholder, which would in this case qualify for Business Asset Disposal Relief (formerly known as Entrepreneurs Relief). The rate of tax charged on the capital distribution would therefore be only 10%.
We worked closely with the group’s accountant to wind up the companies efficiently, dealing with all closure matters appropriately and ensuring that the distribution of surplus cash to the shareholder was made in a timely manner.
What the results were
- Substantial tax savings for the shareholder. in this case, the distribution to the shareholder also qualified for Business Asset Disposal Relief so the tax rate applied was just 10%.
- Swift distribution of shareholder funds
- The MVL process involves advertising for creditor claims. This limits the risk of a creditor accidentally remaining unpaid. If the company were to simply be struck off, any unpaid creditor would have a number of years to apply for the company to be restored and thereafter petition to liquidate the company through the courts, which would result in criticism of the director(s).
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