Wills & Probate Solicitors

Sale of Private Company shares

If you are planning to sell your business to your share holders on death, then how will this be funded? If you have set up a cross option arrangement, are any life policies written in trust? Will the transfer provisions in the articles of association permit the transfer and are you sure HMRC will regard the arrangements you have set up as options rather than binding contracts of sale to ensure that you do not lose inheritance tax business property relief on death?

If you are planning a sale of the company in your life time, have you taken advice at least a year before the sale on the availability of Enrepreneur’s relief. Also bear in mind that inheritance tax is payable on any trust you create in your lifetime, if the assets you place in it are more than your available inheritance tax nil rate band. However, if you have shares or an interest in a business which qualifies for inheritance tax business property relief at 100%, then you can put those shares in trust, whatever their value, without an up front inheritance tax charge. Therefore if you are thinking of selling your business and giving some of the proceeds to your family, it will be better to create the trust with the shares or business interest prior to the sale as business property relief will be lost once the sale takes place.

Creating a trust can affect your claim to capital gains tax Entrepreneur’s relief. However, if you contact us at least one year prior to the sale it may be possible to secure both business property relief and Entrepreneur’s relief.

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