Preparing for Sale
A non-client, a manufacturer, approached EQ to help them in setting up their business to be sold, most likely to the employees. The company was owned by two brothers and, through some excellent trading, had built up significant cash reserves and a large portfolio of stock market investments. The brothers were concerned that, in the event of a sale, the company would not be viewed as trading, thereby denying the owners Entrepreneurs’ Relief (capital gains tax at 10%). EQ were appointed to fix this problem.
How we helped our client
We initially met with this new client to assess their objectives in selling and to discuss potential purchasers. A sale to employees became the clear favourite, but the large cash and investment portfolio was a major barrier to sale.
Demerging trading and investment businesses can often generate huge tax liabilities; however, our EQ Taxperts devised a solution, with tax clearance from HMRC, which allowed the trade and investment operations to be separated prior to a period of consolidation pre sale.
Three years on from that advice, the brothers are on the verge of selling a majority stake in the company to an Employee Ownership Trust. The sellers have retained their surplus cash and listed investments in a highly tax-efficient manner and the employee owners have a structure to incentivise the workforce to achieve new heights.
For more information or to discuss the possibility of selling your business, please contact our Transaction Taxperts.