We have been involved in quite a lot of work in tax efficiently splitting interests in investment companies.
A typical scenario is an investment company where shareholders fall out and want to go their separate ways. Although there are various statutory tax reliefs for break-up situations these tend to only apply to trading companies. There are however equally effective ways of structuring things using capital reductions:
The clever bit is that this kind of structuring leads to a tax free uplift in tax base cost for the £400,000 property. Therefore if this had a £100,000 base cost (say) the £300,000 gain would simply disappear. This is probably an unintended effect which may be changed in the future but we are very happy with the current technical analysis.
Tax Bites are a fortnightly article featuring simple updates about key tax opportunities for other professional colleagues and clients. For further details, contact the author or your usual Forbes Dawson contact via our ‘Contact Us’ page.
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