Buying in own shares

[ASB]

Next year I'll be winding up. However the level of retained profit is such that CGT is going to be payable by me and Mrs ASB even after the 75% taper relief.

So, can I get away with MyCo buying in 50% of it's shares say May 2006 and then winding up May 2007. Conveniently this will split the gain across 2 years.

Question is what business reason I can dream up for doing it to kepp IR happy.

Any thoughts from the accountants??

Simon.

[Bradley]

Happy

Next year I'll be winding up. However the level of retained profit is such that CGT is going to be payable by me and Mrs ASB even after the 75% taper relief.

So, can I get away with MyCo buying in 50% of it's shares say May 2006 and then winding up May 2007. Conveniently this will split the gain across 2 years.

Question is what business reason I can dream up for doing it to kepp IR happy.

Any thoughts from the accountants??

Simon.

The company needs to have been in existence for at least five years to do the share buy-back thing and you can apply for clearance from the Revenue.

If you do the buy-back (with or without Revenue clearance) you have to tell the Revenue anyway within three(?) months I think.

[ASB]

Cheers Bradley,

Been in existance since '83. Problem with clearance is they'll only do it post transaction I think.

Obviously I don't want to pay any CGT at all on the capital distributions (about 100k). This comes down to 25k after relief, still leave some 8k for CGT to be paid on. Think I'll get as much out in divis this year as poss (might just be able to take another 20k without us going into higher rate.

This will reduce the CGT hit to only about 1k if I wind up next year (I've already used this years allowances). That's probably a reasonable compromise, since the hit would be much greater if the tax man disallowed the capital distribution from a buy back (which I think he might due to lack of a real business reason for it).

[Bradley]

More grief

Cheers Bradley,

Been in existance since '83. Problem with clearance is they'll only do it post transaction I think.

Obviously I don't want to pay any CGT at all on the capital distributions (about 100k). This comes down to 25k after relief, still leave some 8k for CGT to be paid on. Think I'll get as much out in divis this year as poss (might just be able to take another 20k without us going into higher rate.

This will reduce the CGT hit to only about 1k if I wind up next year (I've already used this years allowances). That's probably a reasonable compromise, since the hit would be much greater if the tax man disallowed the capital distribution from a buy back (which I think he might due to lack of a real business reason for it).

It's one of the ones that you can apply for prior to the transaction taking place and can be to remove a shareholder that doesn't agree with where the business is going.

I'd also advise that you write to the Revenue to confirm you're able to get full taper relief on the shares. I've seen a few postings/comments about how the Revenue view excess cash as an investment which means your company is then non-trading and not able to get full taper. Wonderful here isn't it?

[ASB]

Thanks Bradley. I must admit I'm a bit concerned as to the level of cash :-(.

I think I'll be OK because most of it has stemmed from people finally paying their billls. Basically the company normally holds about 20 k in cash and about 80k on the sales ledger so it has been necessary for standard trading operation. Since pre transaction approval is available I'll run it past my tax office and see what they say.

Thanks again.