Retirement Relief

[kennyb3]

Situation

- Company with reserves of approx 1 million

- 2 shareholders (also the only 2 directors) over 55

- One looking at taking retirement relief before 2012 (when things may change). Share buy back to be used

- Loan money back to company to use as working capital


Questions

- Legislation says there is no requirement to retire but doesnt flesh this out. But how much distance is required between the company and the person availing?

- Can they remain a director?

- Or draw a salary even as an employee?

 

[Ants09]

So what conditions apply to this relief?

The disposal must be made by an individual (and not for example by a company).
The individual must be 55 or over.
The disposal must be of qualifying assets (e.g. business assets or family company shares).
The qualifying assets must have been held for a minimum period immediately prior to the disposal – normally 10 years.
When the disposal is of family company shares the individual must have been a working director for a minimum of 10 years up to the date of disposal, 5 years of which were on a full time basis.

Although the relief is called Retirement Relief, an individual can still remain actively involved in the business and remain a shareholder and/or director of the company following the disposal of the business assets.

my advice is speak to your tax advisor or accountant as it can be a minefield i

 

[Matthew]

How can one utilise this retirement if there is no buyer for the business.he certainly qualifies and shareholding is 90% and spouse is the other shareholder with 10%.He has build up up approx 200k in cash deposits and wants to take this out.Excluding Plant and machinery which has a net value of 20k other assets are stocks and debtors less creditors.So presumably the cash indirectly equals the goodwill.So does he just create redeemable shares for himself?Subsequently can he keep the business going as a going concern as the business is still profitable and he has a number of staff? Once he gets money out he would not object to staying on in some capacity for a number of years ntil a buyer might emerge when the economy improves.Any suggestions

 

[rocksider]

You need to contact a good tax adviser for the following reasons.... and this won't come cheap.
Firstly, the Revenue will only allow this if it satisfies the "trade Benefit" test. However, they will give you an opinion on this prior to the transaction.
Secondly, the person exiting most reduce their shareholding to less than 30% of their original shareholding to qualify for the relief. The problem here is that "connected persons" are also included in this definition. i.e. Spouse etc.
Thirdly, the relief is also only available on chargeable assets and a formula will calculate this percentage based on the company's balance sheet.
Numerous other issues as well, but just giving you some of the reasons why this is not a "DIY" exercise.

 

[Matthew]

Thanks Rocksider.Your probably right,too complicated for the ordinary Joe Soap so time to contact a good tax adviser.One query re your reply ------I don't understand or never came across this comment about reducing your shareholding below 30%.