Share buy back

[mattster]

Just reading how share buy backs, used by the like of Apple, can be more tax efficient than dividends. That being the case, how long will it be before some chancer dreams up a myco ltd scheme attempting to use the same mechanism?

Must admit it took me a while to twig why they do it, but I also read something a while ago and of course the answer is obvious: capital gains tax is often lower than div tax. Just another scam, really. Unfortunately probably not an avenue open to us, but it is about time the accountants got to work on another loophole that would be.

[Lance]

The basics of it is that you don't actually extract any money when the company buys back the shares... it just increases the value of the shares, you still need to sell them onto to someone else... which just isn't available as an option in any legal reasonable way to a 1 or 2 (in case of spouses) person contractor LTD as a means of distributing profit... and even if it was... the share buyback itself would do nothing as you own 100% of the shares anyway and their value is directly 1 to 1 value to net assets in company.

rubbish. That's exactly what it is. A buy back. They buy them back.


The company buy back the shares you own at a price you are willing to accept (or the price they enforce on you if your shareholders agreement allows it), for cash.
Some buy backs offer you to have more shares instead of cash, but not all.

[mattster]

rubbish. That's exactly what it is. A buy back. They buy them back.


The company buy back the shares you own at a price you are willing to accept (or the price they enforce on you if your shareholders agreement allows it), for cash.
Some buy backs offer you to have more shares instead of cash, but not all.

That really depends on how they do it. They might offer to buy your shares back, or they might just go to the open market and buy shares. If the latter, then you don't need to sell any of yours and the value of your shares will increase commensurate with the reduction in the amount of overall shares.

[NowPermOutsideUK]

In the spirit of the forum title "All hope abandon ye who enter here. Seriously." I will try and add a different persepctive

1) Contractor starts his Ltd with 100 shares at £1 a share
2) Contractor works and after ten years the company has £1MM in cash at bank account
3) contractor sells his shares to a relative / friend for proper market value which means capital gains on the disposal of £1MM profit
4) If however he moves to say Switzerland where shares and CGT are not applicable or another jurisdiction then the entire bank balance is the contractors with no tax to pay
5) The new owner of the Ltd then liquidates the company and withdraws the 1MM - Because he bought it for 1MM there is no profit

Would love to hear serious answers to why this would not work rather than "Its too complicated and you wouldnt understand it"

Have a great Wed!

[northernladuk]

In the spirit of the forum title "All hope abandon ye who enter here. Seriously." I will try and add a different persepctive

1) Contractor starts his Ltd with 100 shares at £1 a share
2) Contractor works and after ten years the company has £1MM in cash at bank account
3) contractor sells his shares to a relative / friend for proper market value which means capital gains on the disposal of £1MM profit
4) If however he moves to say Switzerland where shares and CGT are not applicable or another jurisdiction then the entire bank balance is the contractors with no tax to pay
5) The new owner of the Ltd then liquidates the company and withdraws the 1MM - Because he bought it for 1MM there is no profit

Would love to hear serious answers to why this would not work rather than "Its too complicated and you wouldnt understand it"

Have a great Wed!

Do you not think that that scenario is overly simplistic to the point there is absolutely no way we can give you anything near a reasonable answer?

It's not even worth starting to dig down that rabbit hole.

[NowPermOutsideUK]

No its not simplistic at all - I have actually thought about that for a while but was reluctant to share it for fear of getting ridiculed for pointing out clear tax optimisation strategies- Please explain in an executive summary (few sentences) where the big gaps are so that I might improve my knowledge

[jamesbrown]

In the spirit of the forum title "All hope abandon ye who enter here. Seriously." I will try and add a different persepctive

1) Contractor starts his Ltd with 100 shares at £1 a share
2) Contractor works and after ten years the company has £1MM in cash at bank account
3) contractor sells his shares to a relative / friend for proper market value which means capital gains on the disposal of £1MM profit
4) If however he moves to say Switzerland where shares and CGT are not applicable or another jurisdiction then the entire bank balance is the contractors with no tax to pay
5) The new owner of the Ltd then liquidates the company and withdraws the 1MM - Because he bought it for 1MM there is no profit

Would love to hear serious answers to why this would not work rather than "Its too complicated and you wouldnt understand it"

Have a great Wed!

Er. I think you can simplify all this nonsense to moving overseas and taking a dividend or capital distribution at a favorable (e.g., 0% tax) rate.

But you'd better not return to the UK within 5 years or you'll be taxable in the UK on the full amount as though you'd taken a dividend or capital distribution in the year of return.

[jamesbrown]

I have actually thought about that for a while

Oh dear. You really are a massive cretin.

[Lance]

In the spirit of the forum title "All hope abandon ye who enter here. Seriously." I will try and add a different persepctive

1) Contractor starts his Ltd with 100 shares at £1 a share
2) Contractor works and after ten years the company has £1MM in cash at bank account
3) contractor sells his shares to a relative / friend for proper market value which means capital gains on the disposal of £1MM profit
4) If however he moves to say Switzerland where shares and CGT are not applicable or another jurisdiction then the entire bank balance is the contractors with no tax to pay
5) The new owner of the Ltd then liquidates the company and withdraws the 1MM - Because he bought it for 1MM there is no profit

Would love to hear serious answers to why this would not work rather than "Its too complicated and you wouldnt understand it"

Have a great Wed!

so a bloke with a million pound is gong to buy a company worth a million ponds, for a million pounds, and make no money out of it.
Sure it'll work. But why? What's the point?

[NowPermOutsideUK]

Er. I think you can simplify all this nonsense to moving overseas and taking a dividend or capital distribution at a favorable (e.g., 0% tax) rate.

But you'd better not return to the UK within 5 years or you'll be taxable in the UK on the full amount as though you'd taken a dividend or capital distribution in the year of return.

You are correct about the five year rule - Note that in switzerland dividends are properly taxed as income whereas CGT are not

That is why I went to the trouble of highlighting the steps that would need to be done