About to sell shares in a trading business? What tax planning opportunities are there?

Firstly, it is important to look at who would receive what on a sale of the company. Are family members already shareholders? Does the company have any employee shares or share options?

Secondly, what is the structure of the deal: how much value is being paid out up front; how much is deferred? Are any new shares being offered in the buyout?

Then tax considerations then come into play. What tax is payable? Who is paying it? What tax reliefs might apply? Is it possible to maximise reliefs, perhaps with some pre-sale transfers? Are any company tax deductions possible? Tax clearances from HMRC might be required, depending on the deal structure.

We can then help take a deep-dive into where you want the money to go. Giving large amounts of cash away is unpalatable to many. The loss of control over the cash is often a barrier.

This is a potential solution which works for some.

The concept is simple in outline; shares are settled into Trust before the company is sold. The Trust makes a sale of the shares, then holds cash which is for the benefit of your children (provided they are not minors), possibly grandchildren.

The Trustees maintain control of how the cash is used. The kicker – you can be a Trustee, so you can maintain control over the cash, but you, your spouse or civil partner, and your minor children can’t benefit from the Trust.

The use of a Trust in this way can help protect family wealth from unforeseen events like bankruptcy or divorce.  Trusts can have great flexibility in terms of which beneficiaries receive value. It can also be useful if beneficiaries are too young to control or manage their finances. Note here the important point that while your Trust should not be for the benefit of your minor children, having minor grandchildren as beneficiaries is generally fine.

The tax consequences of these arrangements need to be considered carefully; Capital Gains Tax, Inheritance Tax and potentially Income Tax are all potentially in play.

But the ability to utilise reliefs, nil rate bands, and the way Trust settlement rules work even if you were to die within seven years of a gift into Trust, mean that this is likely to be an extremely tax efficient way of passing wealth to the next generation(s).

✅ Identify all existing shareholders and shareholdings
✅ Review any employee shares or share options
✅ Understand the deal structure: upfront vs deferred payments
✅ List all potential tax liabilities and reliefs available
✅ Consider pre-sale planning such as gifting or Trust creation
✅ Explore the use of a Trust to protect and control wealth
✅ Confirm any HMRC clearance requirements
✅ Talk to tax and legal advisers early
✅ Set clear goals for how and when you want family members to benefit
✅ Create a post-sale wealth and estate strategy

Our Corporate Finance and Tax and Trust teams can help you navigate the complexities of a business sale – the process, mechanics, and understanding the tax position. We can also ensure that you maximise tax reliefs, and help you plan more widely for protecting your wealth, than just ‘getting the deal done’.

Naturally, the more time we have, the more pre-planning opportunities there are! It is likely to be an extremely stressful process, so having reliable and trusted advisers to help you interpret the process from the start is essential.

Let’s start a conversation by clicking here…