Case Study
A Tax Efficient Sale
10/Jul/2007
Our client owned a group of 12 pharmacies across England and Wales and received an offer from one of the multiples which wanted to purchase 9 of those pharmacies for £8.5 million. Ordinarily when a series of pharmacies are operated through one company, the usual way for disposing of individual pharmacies would be to sell their assets to a purchaser and retain ownership of the company itself (thereby retaining ownership of the remaining pharmacies).
However, in our client's case this would have resulted in the majority of his pharmacies changing hands without Business Asset Taper Relief applying to reduce his capital gains tax liability on the sale.
In conjunction with our client's tax advisers, we put in place a structure (called a 'de-merger') where a statutory procedure was used to liquidate the original company and transfer its assets into 4 new companies; one company owning the 9 pharmacies to be sold to the multiple and the other 3 companies owning one of the remaining pharmacies each. This method preserved our client's Business Asset Taper Relief and reduced his tax liability by several hundred thousand pounds. The company owning the 9 pharmacies was then successfully sold to the multiple and the remaining 3 companies are in the process of being sold to a different purchaser.
However, in our client's case this would have resulted in the majority of his pharmacies changing hands without Business Asset Taper Relief applying to reduce his capital gains tax liability on the sale.
In conjunction with our client's tax advisers, we put in place a structure (called a 'de-merger') where a statutory procedure was used to liquidate the original company and transfer its assets into 4 new companies; one company owning the 9 pharmacies to be sold to the multiple and the other 3 companies owning one of the remaining pharmacies each. This method preserved our client's Business Asset Taper Relief and reduced his tax liability by several hundred thousand pounds. The company owning the 9 pharmacies was then successfully sold to the multiple and the remaining 3 companies are in the process of being sold to a different purchaser.
