It is very refreshing and uplifting to see from time to time government initiatives to assist tax payers in organising their affairs particularly in relation to the sale of a business. DFK have been handling the sale of businesses for clients for over 30 years and the first question asked, “Should I sell the company or the assets?”
The answer is a simple yes given the 50% discount for the sale of the company. Unfortunately, this method is invariably not the first choice for buyers and sales have failed because the purchaser will not accept potential liability for undisclosed liabilities of companies.
Fortunately the legislation provides for reconstruction relief which is available for the transfer of assets and liabilities to NewCo and the business is transferred by the sale of the NewCo shares (identical shareholders to old company).
This satisfies the 50% discount provisions and allows the purchaser to purchase a clean structure.
Importantly, there are also similar stamp duty provisions (state) which allow properties to be similarly transferred as part of the business sale for nominal duty.
The procedural steps are complex and require specific accounting and tax advice. As well, each case is the subject of a specific (Stamp Duty) application for exemption. So long as there are no Part VA issues, approval is generally granted.
The Government clearly sees the benefits of business continuing as ‘going concerns’ to the benefit of all stakeholders including employees.
See our article on ‘Listing your Company – being investment ready’
The above content is general information only, and not to be relied upon as accounting or tax advice. For further information, please contact DFK Richard Hill.