A reorganisation of a Corporate Structure can be achieved in a tax efficient manner, and often entirely tax free. Where there is a compelling reason to do so, in order to achieve a particular objective, we encourage companies and their owners to consider changing their corporate structure. In this first of two articles, we explore -
5 reasons to reorganise your Corporate Structure
Ring-fence valuable assets – often companies hold valuable assets together with the main business activities. These assets are therefore at risk if the business experiences a downturn in trade, or is subject to any form of litigation. By transferring valuable assets such as property, IP, plant & machinery or surplus cash into a different company within the same group, this can protect these from business risk.
Separate a non-core business for sale – a company may have various activities in the same entity. If one of these becomes non-core, it may be advantageous to separate it out from the “main trade”, perhaps in anticipation of a sale.
Allow shareholders to go separate ways – irrespective of the best intentions at the outset, business owners can and do fall out, and there can be a need for businesses to be separated to allow owners to go their separate ways. If each owner wishes to carry on running part of the company’s activities this can necessitate splitting the business up to allow an effective parting of ways. A reorganisation can help achieve this to meet the owners’ objectives in a tax efficient manner.
Separate divisions – Entrepreneurial business owners often build up a number of different business activities in a single company. This can lead to several different trades operating alongside each other, even if they do not necessarily sit well together. These can be separated so that each distinct division is within a separate standalone or group company, allowing each to run independently.
Ensure qualify for tax reliefs – There are various tax reliefs available for companies that are part of a group. It may be worthwhile ensuring there is a group in place, so that these are available. One such relief is that when a company sells a trading company, providing certain conditions are met, the sale can be exempt from corporation tax leading to a tax free sale.
These are just a few of the reasons why a business should be restructured, and there are several other ways in which companies can look to reduce their corporation tax. There is no substitute for discussing your objectives with a professional adviser, who can help to guide you through the benefits and pitfalls of any corporate reorganisation.
We have helped many business owners restructure their businesses. so, if you would like to learn more about ways in which your business could be restructured, please get in touch for a no obligation discussion with a member of our business taxes team.
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