For what might be the biggest commercial transaction of your life, getting your house in order and managing the tax (and risk) efficiencies involved, can (i) help make the sale actually happen; and (ii) ensure you retain the highest proportion of the value you have generated ……………
When you are gearing up for a trade sale, we can provide you with an essential tax support service which will review the proposed commercial transaction from an early stage, and will advise you in the following important ways:
(i) Tax on the sale itself
We will clarify for you the likely taxation implications to arise from your sale including, in particular, ensuring that the Entrepreneurs’ Relief (ER) rate of Capital Gains Tax will be achievable, where possible. (ER is dangerously assumed by many, despite the risks and pitfalls hiding in the relevant tax law.)This will also provide you with advice and guidance in relation to the potential tax consequences of proposals for important matters like deferred consideration, consideration in the form of loan notes (or other securities), and any “earn-out” arrangements;
(ii) Pre-sale planning
We will consider for you whether there might be any valuable pre-sale (and post-sale) tax planning manoeuvres which you might consider undertaking, with a view to reducing your overall tax on the proposed sale.By way of one very simple example, we might advise those agreeing to stay on in the company’s employment during a transitional handover period, to downgrade their agreed salary arrangements in favour of higher deferred consideration and a potentially far superior tax outcome.
(iii) Protection from claims
We will provide you with advice and assistance on any risks inherent within the taxation parts of the Sale and Purchase Agreement (“SPA”) and any other applicable deal documentation, including, in particular, considering the fairness and appropriateness of the draft Tax Warranties and Tax Covenant (the latter also sometimes known as the Tax Deed).This will be done with a view to minimising the risk of post-sale claims against you, from the Buyer.
(iv) Estate management
In case you are interested to explore your longer term estate management and Inheritance Tax (IHT) position (bearing in mind that immediately after your sale you will typically lose relief from IHT on the value involved) we will review what might usefully be done before the sale is executed to put elements of that value into IHT-sheltered places, while that Business Property relief still applies.
(v) House in order
Ahead of all of the above, we will review your company’s tax compliance affairs to make sure that your house is in order and that the potential Buyer’s due diligence can run as smoothly and positively as you would hope.This early overview of the company’s compliance might cover Corporation Tax, PAYE, National Insurance, VAT, R&D Tax Credits, forms P11d, EMI share options (and other aspects in specific circumstances).
The above represents a menu of the typical tax support services we might valuably provide to you and your company ahead of a potential sale. If you would like to explore this for yourself and your business, whether in contemplation of a shorter, or longer, term transaction, please get in touch with your relationship principal here at Harold Sharp or email Tax Partner, Chris Barrington.