Chapter 28 Sale of shares

Question 1

28.2 Sale of shares between unconnected individuals

Answer 1

Seller: have a chargeable gain or loss on disposal. Individuals may be able to claim business asset disposal relief if conditions are met.
Company whose shares are sold: only potential tax consequence is if there is a major change in the nature or conduct of the trade within a five-year period.

Question 2

28.3 Sale of shares between unconnected companies

Answer 2

Seller: will have a chargeable gain or loss on the sale unless subject to SSE. A degrouping charge could apply on the disposal of shares. The company will have one fewer related 51% group companies.
Company whose shares are sold: the carry forward of trade losses will be restricted if there is a major change in the nature or conduct of its trade within a five-year period. The company will no longer be within a group relief group with the seller when the arrangements come into force, the company may have pre-entry capital losses. There may be an IFA degrouping charge, which will be taxed in this company.
Buyer – they will have an extra 51% related company from the AP in which the shares are acquired. They are buying a company with history and relies on representations from the seller. It should require indemnities from the seller agreeing to pay them if it incurs any costs as a result of any undisclosed liabilities or losses within the company.