A father was the sole shareholder of a successful trading company and wished to take a back seat leading up to his retirement so that his children could take over the running of the business.
He did not have any other pension arrangements and therefore needed to extract a value from the company for his shares, however, he did not want his children to pay for these directly. A dividend could be taken but the size of the tax liability and existing company reserves ruled this out as an option.
A family Management Buy Out arrangement was undertaken whereby the children established a new company as a vehicle to acquire the shares. With careful planning, we were able to secure a structure with full HM Revenue and Customs approval whereby the new company was able to acquire the father’s shares over a period of time from accumulated reserves and future profits whilst also securing his entitlement to entrepreneurs relief.