Selling clients held in Limited Company

[Jeeves1478]

Hi, I’m hoping I can get some idea on the most tax efficient way to sell my clients my limited company ‘owns’.
I have agreed a fair price for my client base of around £400k with a larger company, and ideally would want to use business asset disposal relief (at 10%). I’ve been told by my accountant that the only way I can avoid lots of tax, and benefit from BADR, is to sell the limited company (100% of shares) to the buyer.
Is there a way of selling client’s for the agreed sum, and then closing down the ltd co using MVL or similar? The ltd company has around £100k in cash, no assets (other than clients), or debts. Or would Corporation tax be payable as well on the sale price as well?
Thanks

 

[ChrisCallaghan]

Hi,

Short answer is yes. I often handle MVLs where the company directors have sold the business, i.e. goodwill, assets, client base etc who then look to close the company by MVL, which leads to the funds being distributed to the company's shareholders. Most will then go on to claim BADR.

However, though I am not a tax advisor, I understand it usually more tax efficient to do a share sale.

I recommend sitting down with your accountant and going through the tax implications of each option before deciding what is right for you.

 

[PCD]

The client base belongs to the company so if is sold Corporation Tax will be payable on the gain which assuming there is no cost of the asset would be most of the proceeds. Once sold the company could be closed by MVL and the proceeds you receive would likely qualify for BADR. Selling the asset rather than the shares means that there are two bites at the tax which is why it is better to sell the shares. Any purchaser would however most likely to prefer buying the assets.

 

[Gyumri]

@ Chris Callaghan is correct about getting some tax advice.

However, I can't see how the company per se has any asset to actually sell unless the clients are locked into some type of assignable contracts which can be continued by the buyer.

The clients do not obviously "belong" to the company.

 

[Lee Green]

If you did head down the MVL route, its worth noting that you could get a discount on the final CT liability, by paying this through the MVL.

As others have said though, its best to get advice from your accountant and typically a sale of shares would be best.