Construction & Property: Case Study 6

Background

Our client commenced in business as a property developer. Over a number of years, a significant element of the profit achieved from property development was invested in property which was being let to third parties.

The investment property was purchased in group companies and was now significant enough to prevent tax reliefs available to trading groups from being available.

We were approached to advise on how to tax efficiently separate the trading and non trading activities.

Our Approach

  • Identification of the tax reliefs which were unavailable to the group's shareholders, and the group, as a result of the significance of the non trading activities in the group
  • Review of tax legislation to identify alternatives for tax efficiently separating the trading and non trading activities in the group
  • Presentation of alternatives and their associated tax effect to the shareholders of the group
  • Leading the implementation of the restructure exercise to achieve the segregation of the trading activities in a fresh corporate structure from the other activities

The Benefits to the Client

  • Achievement of the separation of the trading activities from other activities allowing both to operate efficiently independent of one another
  • Removal of confusion created for the management of the trading businesses by the group's non trading activities
  • Access to valuable tax reliefs on the shares owned in the separated trading corporate structure
  • Minimal tax liabilities suffered on the restructure exercise
  • The ability to market the trading group for sale without potential purchases being put off by the group’s significant non trading activity

The Plus Factor in Action

  • We helped our client make money through the restructure implemented delivered a separate trading group which could be sold for significantly reduced tax liability and the restructure itself was delivered with minimal associated tax liabilities
  • We saved our client time through our experience of leading these restructure exercises our client could rely on our expertise in liaising with the other professional advisers involved to allow them to reinvest this time saving in themselves or the business
  • We gave our client peace of mind through our experience in delivering tax efficient restructure exercises allowed the business owners to focus on running the business knowing that the historic tax risks were being taken care of through the restructure
  • We supported them now and in the future as planning our work, we took time to understand our client's objectives. The restructure we delivered achieved their main objective of establishing a separately identifiable trading group capable of being disposed of with minimal tax liability. Subsequent to the restructure we worked on with the client to diligence the trading structure ready for sale and we are now assisting in marketing the business for disposal. On disposal the shareholders' ultimate objective will have been achieved with an associated tax liability of 10%; 50% lower than that which would have been suffered without restructure.
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Key Contact

Gill Pryde
Partner

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+44 1224 625111

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