Abstracts » Business

Extracting value from the family company part 2

Article Abstract:

Owners wishing to extract value or cash from a family company through loans are potentially liable to two separate tax liabilities under the UK Income and Corporation Taxes Acts of 1970 and 1988. The liabilities include: an income tax charge under beneficial loan provisions; and a notional advance corporation tax. Under the 1981 Companies Act, owners wishing to extract cash or value from a family company through stock repurchase have to meet certain conditions, including: the company must have authority in its Articles of Association; at least one shareholder must remain after the purchase with at least one irredeemable share; and shares purchased must be cancelled. Owner buy-ins result: because of a death of a shareholder; to prepare for a succession; or to severe links with a company.

Methods, Family-owned businesses, Family corporations

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The fund raiser's guide to tax traps

Article Abstract:

The UK Income and Corporation Taxes Act of 1988 has had an impact on British charities. Most forms of investment income charities receive are tax exempt provided they are used for charitable purposes. A very restrictive form of exemption is offered on trading profits. Activities such as bazaars and carnivals are exempt even though they fall under the wider definition of trade. Large charities may have a difficult time meeting the requirements that the activities do not amount to regular trading, and that the activity is not in competition with other traders. Under the primary purpose test, a charity must always be fulfilling one of its prime objectives when conducting trade. The trade must be carried out by beneficiaries of the charity.

Analysis, Laws, regulations and rules, Accounting, Charities, Charitable trusts, Charitable societies

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The MBO game plan

Article Abstract:

Most management buyouts in the UK entail the formation of a new company (Newco) by the managers to acquire the target firm. The managers and their financial backers receive consideration for the equity put into the Newco, which has been structured for the provision of debt finance. Through Newco, the interest is repaid from the targeted firm's cash flow and tax relief is achieved for the interest payments. Major areas of consideration in the area of taxation include Schedule E problems, chargeable event regimes, and ratchet arrangements. Some financial planning issues for the managers include setting up non-resident trusts, pensions planning, and insurance.

Management buyouts, Leveraged buyouts

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