1. www.cvdfk.com Tax Issues on Buying and Selling Private Companies Mike Cooper IoD Conference 2011

2. Overview of the sales process Structuring Share options Reliefs etc Pre-sale Share versus asset sale Sales process Consideration Tax clearances Inheritance tax etc Post sale

3. Share v Asset sale Share sale Asset saleDouble taxation Seller will pay 29% - 57% Share saleSingle taxation Seller will pay CGT @10% - 28% Asset sale

4. Prior to sale: Securing the 10% tax rate! Entrepreneurs Relief (ER) reduces the capital gains tax rate down to 10%. The main qualifying conditions are: company must be a “trading” standalone/parent company shareholder must have at least a 5% holding of ordinary shares & voting rights shareholder must be an officer or employee of the company above conditions must usually be satisfied for 12 months prior to disposal of the shares Each individual has a maximum lifetime entitlement to ER of £10million!

5. Prior to sale: Structuring – property & trade Shareholders Property AND Trade Shareholders Property Shareholders Trade Holding Company PropertyTrade Shareholders Property ring-fenced against commercial risk Can sell property or trade Most tax efficient Cheapest to implement

6. Sellers planning Extracting surplus funds in advance ER risk Dividends/bonuses/pensions Salary/dividend freezes Share capital reduction Claiming reliefs R&D Tax Relief Capital Allowances Buy - out minority shareholders? Share Options Management Buy Outs Split of consideration – cash/loan notes/shares

7. Buyers planning Split of consideration Intellectual property Employment tax Property reliefs VAT Borrowing & debt relief EIS/ CVS reliefs Due diligence

8. Post sale: Sellers Tax shelters/ wealth management Tax returns and post transaction rulings Inheritance tax 2 year rule for BPR 7 year rule to get assets out of taxable estate Investment planning Pension planning Emigration Capital gains tax EIS investments (IT/ CGT/ IHT benefits) Interaction with Entrepreneur Relief

9. Post sale: Buyers Reorganise? Loss protection Claim any missed reliefs

10. Summary Fail to plan, plan to fail! Plan now Financial information - accounts, CT returns – all must be real time CVDFK can help!

11. Contact Chantrey Vellacott DFK LLP Russell Square House 10-12 Russell Square London WC1B 5LF Mike Cooper Tax Partner 0207 509 9201 07976 709910 mcooper@cvdfk.com