What Is A Share For Share Exchange And How Can I Benefit From It?

31st July 2020 | Uncategorised

A share for share exchange is where a company issues shares to a person in exchange for shares in another company. These exchanges often occur when forming new holding companies in order to transfer assets out of the original company. To ensure the transaction is tax neutral and does not result in capital gains tax, income tax and stamp duty being chargeable these exchanges need serious consideration and thought.

The qualified tax experts here at Williamson & Croft offer Share for Share Exchanges as a service here and we can help you if this is something you’re interested in. But first, let’s take a look at why you might consider this and the benefits.

What Are The Benefits Of Holding Shares In A Holding Company?

We often get asked this question from many businesses across the digital & creativeretail & eCommerce and property industries as well as many more. One of the main reasons to do a share for share exchange where you put shares into a holding company is to ensure profits that you have worked hard to create can be retained outside of the trading company without incurring an income tax charge.

By doing this you’re ensuring that profits are protected and can be used if you’re struck by adverse business conditions at some point in the future.

Other reasons include:

  • Consolidation of a number of companies so that they operate together more effectively.
  • To split the structure of your business if it’s best for one strand of the business to operate independently.
  • If an acquisition is on the horizon and it makes sense for a new company to slot into the structure.
  • If assets need to be moved around to ensure they are in the most efficient tax location and be protected.

What You Need For A Share For Share Exchange

There are a few things you need to implement a successful exchange. These include a checklist, a proper timeframe, a qualified tax advisor and the following things.

Shareholder Agreement

It is essential you get the thumbs up from your shareholder for this exchange of a scheme of arrangement. Thankfully, the team here at Williamson & Croft will manage compliance issues like board approval.

Lots Of Documentation

There is lots of documentation to do with these types of exchanges that can put people off from going down this road. Thankfully we’ll be able to sort all of that, leaving you to focus on the things that really matter. We’ll handle:

  • Revised article and shareholder agreement so the structure remains sound once the transition has been completed
  • Consultation with employees that are affected by this transaction
  • The clearance application required by HMRC
  • Document stamping and liaising with HMRC
  • Reporting and payment of any taxes to HMRC

Contact Us For More Information

If this service looks like something that would be of interest to you, your shareholders or your business then please get in touch with the experts here at Williamson & Croft. The team here will happily guide you through this process and offer advice and tips that can make this progress as seamless as possible.

Williamson & Croft is a market leading accountancy, advisory and tax firm with particular specialisms in property, construction, retail, digital and creative, technology and professional services.

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