How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Sam Pathak Your Own Question

Sam Pathak
Sam Pathak, Mr S Pathak MBA FCCA CTA
Category: UK Tax
Satisfied Customers: 464
Experience:  Tax Consultant & Freelance Lecturer over 9 years experience
Type Your UK Tax Question Here...
Sam Pathak is online now
A new question is answered every 9 seconds

Hi, Im selling my 50% stake in a uk ltd company that I have

Resolved Question:

Hi, I'm selling my 50% stake in a uk ltd company that I have held since 2003 July. The only assets in the company is £200k cash that in the company account. the reason for me selling is a dispute over £50,000 in expenses. is it better for me to incorporate the £50,000 into the sale price of the shares as i believe this will be taxed at 10% entrepreneurial relief. or do i have to receive them as income?
Submitted: 1 year ago.
Category: UK Tax
Expert:  Sam Pathak replied 1 year ago.

Hello,

Thank you for your question.

To consider the availability of Entrepreneur's Relief (ER),

(1) What was the company doing?

The potential issue for ER is the large cash reserve and no other assets, as HMRC might deny the ER saying that the co. is primarily 'holding' cash, unless there is a promising business plan to use that cash in the co.'s trade.

Look forward to hearing from you.

Best regards
Sam Pathak

Customer: replied 1 year ago.

the company is FCA authorised selling insurance products.

Expert:  Sam Pathak replied 1 year ago.

Dear XXXXX

 

Apology for the delay in getting back to you. Thank you very much for your response.

 

To start with the ER,

 

It appears that this sale would qualify for ER, therefore, applicable CGT rate is 10% only,

provided

- you are director (or, worked for the company), assumed correct.

- company is a trading company, which is the case, and

- you have not already made capital gains of £10m in your life, in the past, assumed correct.

- All other conditions appear to have met.

 

The only potential issue as mentioned above is that - HMRC may argue that the co. is holding large 'cash' with no other business assets, therefore, an investment co. rather than a trading co.

 

This relatively modest risk can be minimised by having a business plan for the use of that cash, just in case queried by HMRC which is generally rare.

 

This is the only point of a slight concern, for ER.

 

I have dealt with cases with large 'cash' reserve in the balance sheet, and successfully claimed ER without any HMRC queries.

 

So, I am of the opinion that ER is available in your case.

 

If you wish to be fully assured, you might consider making a non-statutory business clearance application to HMRC for a trading status ruling on behalf of the company.

Link below for this:

 

http://www.hmrc.gov.uk/manuals/nbcgmanual/nbcg8800.htm

 

http://www.hmrc.gov.uk/manuals/cgmanual/cg64100.htm

 

Now, turning to the next point,

 

CGT rate with ER is always cheaper, compared to income tax. Therefore, you may wish it to be included as part of the sale price.

 

I trust the above clarifies.

 

Best wishes

Sam Pathak

Sam Pathak, Mr S Pathak MBA FCCA CTA
Category: UK Tax
Satisfied Customers: 464
Experience: Tax Consultant & Freelance Lecturer over 9 years experience
Sam Pathak and 5 other UK Tax Specialists are ready to help you
Customer: replied 1 year ago.

how do i value my shares ?

Expert:  Sam Pathak replied 1 year ago.

Dear XXXXX

Thank you very much for your acceptance and further queries.

Valuation is a bit difficult and tricky.

You value the business overall and probably agree the value of your proportion with the other 50% holder.

Valuing business:

It depends on a lot of the factors. Typically some use the profit basis as:

Look at the last three years profit, average them, and multiply with a factor 2.5 to 3 depending on types and nature of the business.

Then, split your proportion, then discount it by around 20%.

The above is not a hard and fast rule, just a practical sort of guidance.

Also, some use external valuer (can google to find the valuer firms).

The above is not a tax advice as such, but something based on my experience.

Hope the above would help.

Best wishes
Sam Pathak
Customer: replied 1 year ago.

do you know of a reputable firm to do the valuations. Google throws up lots of strange set ups.

Expert:  Sam Pathak replied 1 year ago.

Dear XXXXX

Thank you for your response.

Apology, I have not used one, so I can't say for sure.

You can research around and ring a couple of them to find out more.

Best wishes
Sam Pathak
Sam Pathak, Mr S Pathak MBA FCCA CTA
Category: UK Tax
Satisfied Customers: 464
Experience: Tax Consultant & Freelance Lecturer over 9 years experience
Sam Pathak and 5 other UK Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Andrew Baker(baktax)

    Personal Tax Adviser

    Satisfied Customers:

    756
    35+ years experience in income tax, CGT, non-residence
< Last | Next >
  • http://ww2.justanswer.com/uploads/baktax/2009-7-15_202414_Frame.jpg Andrew Baker(baktax)'s Avatar

    Andrew Baker(baktax)

    Personal Tax Adviser

    Satisfied Customers:

    756
    35+ years experience in income tax, CGT, non-residence
  • http://ww2.justanswer.com/uploads/teap007/2009-01-10_145815_bill_justanswer_for_profile.jpg TEAP007's Avatar

    TEAP007

    Tax Preparer

    Satisfied Customers:

    754
    Fully Trained Inspector of Taxes / District Inspector/ Team Leader/ Offshore Consultant/ 41 years
  • http://ww2.justanswer.com/uploads/BE/berduchwal/2011-6-7_84817_pict0854.64x64.jpg berduchwal's Avatar

    berduchwal

    Accountant

    Satisfied Customers:

    669
    Qualified accountant and bookkeeper running my own practice since 2008.
  • http://ww2.justanswer.com/uploads/JO/Josh2010/2012-4-29_19490_GettyImages80121770B.64x64.jpg Joshua's Avatar

    Joshua

    Lawyer

    Satisfied Customers:

    61
    LL.B (Hons), Higher Prof. Dip. Law & Practice
  • http://ww2.justanswer.com/uploads/RO/Ronaann/2012-3-19_23343_SSL22629.64x64.JPG Mrs-Tax's Avatar

    Mrs-Tax

    Tax Adviser

    Satisfied Customers:

    59
    Law Degree, 19 years in UK Tax.
  • http://ww2.justanswer.com/uploads/TG/TGraham12/2012-7-17_81212_bigstockBusinessHandshake508163.64x64.jpg Thomas's Avatar

    Thomas

    Solicitor

    Satisfied Customers:

    48
    Exposure to general tax issues
  • http://ww2.justanswer.com/uploads/struppiaml/2009-10-9_95150_anthony_business_002.jpg AnthonyL's Avatar

    AnthonyL

    Tax Adviser

    Satisfied Customers:

    19
    ATT, ATII, 12 years tax experience