Sector: Engineering
Location: Yorkshire
Services: Business succession planning · Capital reduction demerger · Business asset disposal relief
The situation: a family business ready for the next generation
This Yorkshire engineering business, originally built by a husband and wife, had reached the point of succession. The plan was to sell to their son and a key employee, both already working at the company. The commercial premises, however, were mortgage-free and a significant asset. The owners wanted to retain them as part of their retirement income, not include them in the sale.
The tax problem
The owners wanted to sell the trading business using Business Asset Disposal Relief, which means paying 10% capital gains tax on the proceeds rather than the higher rates. But they couldn’t do that without first separating the commercial premises into a different entity. Simply extracting the premises as a distribution from the company would have triggered income tax of £140,000 and stamp duty of £7,000.
What Ascentis did
We structured a capital reduction demerger, transferring the commercial premises into a separate limited company without triggering income tax, corporation tax, or stamp duty. This required clearance from HMRC and involvement from solicitors, but it preserved the owners’ ability to claim Business Asset Disposal Relief on the sale of the trading business.
The result
- Income tax of £140,000 avoided
- Stamp duty of £7,000 avoided
- Total saving of £132,000 after professional fees
- Owners retained the commercial premises for retirement income as planned
- Trading business successfully transferred to the next generation
Getting the structure right before a succession can make a six-figure difference. Most directors only find this out after it’s too late to act. This family found out in time.