Will your Share Buy Back pass the ‘trade benefit’ test? Reply

Successful Businessman With A Contract In Hand

Often as part of an exit strategy or succession planning companies will buy back shares.

Setting aside the mechanics, nicely explained in the ACCA Technical Factsheet 177 and the need for S1044 CTA 2010 clearance, the Buy Back has to be in the benefit of the trade not just the shareholder.

For example….

If the purpose is to ensure that an unwilling shareholder who wishes to end his association with the company does not sell his shares to someone who might not be acceptable to the other shareholders, the purchase will normally be regarded as benefiting the company’s trade.

Examples of unwilling shareholders are:

  • an outside shareholder who has provided equity finance (whether or not with the expectation of redemption or sale to the company) and who now wishes to withdraw that finance
  • a controlling shareholder who is retiring as a director and wishes to make way for new management
  • personal representatives of a deceased shareholder, where they wish to realise the value of the shares
  • a legatee of a deceased shareholder, where he does not wish to hold shares in the company

Assuming that the shares aren’t being bought back at Par Value, basic rate taxpayers will probably prefer dividends for any surplus where as higher rate taxpayer will want capital treatment.

Share Buy Back is complex, make sure you seek professional advice.

 

steve@bicknells.net

 

 

Have you got a Will? 2

Signing Last Will and Testament

Currently 47% of UK adults die intestate, in other words without a will.

The new Inheritance and Trustees’ Powers Act 2014 (ITPA 2014), came into force on 1 October 2014.
Here are some of the New Rules:
  1. Where there are no children, the entire estate will pass to the surviving partner (this shuts out blood relatives such as parents, brothers, sisters or their children)
  2. Where someone dies leaving a spouse and direct descendants the first £250k will pass to the surviving spouse/partner plus 50 per cent of the remaining balance as a capital sum (previously they had a life interest in 50 per cent of the remaining balance)
  3. Unmarried couples continue to recieve nothing if their spouse dies intestate

If you are tempted to try a ‘do it yourself’ Will, think again, they might be cheap but the consequences of getting it wrong could be extremely costly for your family.

If you own a business you also need to consider carefully what your succession plan will be.

My advice is to see a solicitor carryout estate planning and prepare a will.

 

steve@bicknells.net