“Asset extraction”

Asset out is a Transtax framework, it has been designed to deal with a common challenge that many businesses are faced with.

Scenario

There continues to be a steady stream of enquiries regarding the desire to either extract capital assets from the company or to separate trading and investment activities.

These situations often arise through:

  • a concern over the security of the business.

most of the shareholders wealth is held in the company

  • succession planning

the shareholders wish to withdraw from the business but retain an income stream.  A typical scenario would be where the business is being passed to the next generation or an MBO is in prospect.

  • a shareholder dispute

one or more of the shareholders wish to exit the business but take either part of the trade or an investment asset as part of the process

  • an impending sale where the vendors wish to retain, or the purchasers do not require, some of the trade or assets.

the trade is carried on from trading premises which are not required by the purchaser.

there is a separate trade which is to be retained by the vendors.

  • Recognition of the potential loss of entrepreneur’s relief and Business Property relief.

the company has become tainted by investment assets.

Challenge

In all of the above examples a simple division of the business will not generally provide a solution and the shareholders will be faced with an income tax bill.

However there are alternative planning techniques that can be employed to achieve the desired result at a low or no tax cost.

In most circumstance the use of a statutory demerger route will not be appropriate as the qualifying criteria are unlikely to be satisfied.

Consideration can be given to using the reorganisation and reconstruction reliefs contained in the taxes acts.  Used with care, and there are a number of potential pitfalls, a solution can be provided with the added attraction that advance HMRC clearance for the transaction can be obtained.

Although not exactly the same in every case the normal results of using the TT Asset Unlock frame work are:

  • Opportunity to generate a separate income stream
  • Diversify the investment strategy
  • No tax charges arise when implementing the solution
  • Creates the opportunity to undertake Inheritance planning
  • Reduced risk – HMRC approved

If you would like to discuss this approach please contact us