Hive down. Company pre-sale planning.

Prior to the sale of a business or trade, business owners MUST seek tax advice. There are multiple tax planning opportunities that can be explored prior to the sale, potentially reducing taxes down to an absolute minimal.

One potential 'opportunity' is the hive-down strategy.

Utilising a hive-down strategy can amplify the appeal for corporate/OMB sellers seeking to dispose a business. Rather than directly selling business assets to a buyer, transferring the business into a subsidiary company and then vending the subsidiary can present tax advantages.

This approach ensures the buyer inherits a pristine company (ie not a 'dirty' company that buyers will always prefer - no liabilities etc) with potential tax benefits, thus mitigating risks linked with directly acquiring business assets.

Key tax considerations in a hive-down encompass preserving trading losses, transferring capital allowances assets in a tax-neutral manner, and potential exemptions from capital gains tax for the corporate seller under the substantial shareholdings exemption (SSE). Nevertheless, meticulous and careful structuring is imperative to meet conditions for tax exemptions, such as upholding a corporate group for at least 12 months before the hive-down.

Furthermore, it is crucial to thoroughly assess the hive-down's impact on capital gains, intangible asset degrouping charges, Stamp Duty Land Tax (SDLT) on property transfers, and Value Added Tax (VAT) implications. Structuring considerations, such as leaving consideration outstanding on inter-company loan accounts and share sale arrangements, also necessitate careful planning to optimise tax efficiencies.

For comprehensive advice tailored to specific circumstances, it is advisable to consult tax experts with experience in such areas. If you are considering a business sale or hive-down (or have clients that are), do not hesitate to reach out for guidance and the professional support, which is prudent in such life-changing and intricate transactions.

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We are a young, dynamic team of Chartered Tax Advisors, owning experience in such corporate transactions, as well as an arsenal of strategies in inheritance tax planning, which usually goes hand in hand on sale of businesses...

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Omar