Selling a property company: taxation and due diligence advice
If you are looking to sell a property development company or construction business that trades through a limited company, be aware that there are potentially extensive taxation and legal due diligence issues to be considered.
Buyers of shares in either a property development or construction business are understandably nervous about potential historic or ‘legacy’ issues such as CIS or VAT compliance failures.
This can lead to buyers requiring extensive warranties and indemnities in the sale agreement which in turn can cause delays to the deal and additional legal costs for all parties.
Hiving down the parts of the business that a buyer wants to purchase into a newly incorporated ‘clean company’ just prior to the sale can, in certain scenarios, provide a solution to the problem of buyers being unwilling to take on any risk at all when it comes to historic compliance failures in the business.
It can also be particularly attractive from a tax perspective due to the relaxation in last year’s budget of a long-standing corporate relief known as the Substantial Shareholdings Exemption (“SSE”). This brought businesses that commenced after April 2002 into the scope of the relief on hive downs.
If you are selling your property development or construction business then in certain corporate group scenarios there may be potential to sell this completely free from corporation tax utilising SSE and recycle the proceeds around the group. Examples of how this could be utilised include funding new developments or reducing the group’s debt.
Whether you are looking to sell a specific development, your existing business or you are a prospective purchaser, it is best to take advice on structuring a prospective sale to maximise the available tax reliefs.
For advice, contact James.firstname.lastname@example.org
Residential property owners have certainly had to put up with their share of tax changes in recent years and now there’s another fundamental change on the horizon where disposal...
Here are Cowgills top five tax tips for commercial property landlords operating as individual owners or in partnerships.
If you are a property developer the way your deals are structured will make a big difference to the tax liabilities, access to finance and cash flow for each...