Tax planning plays a very important part at the outset of any acquisition, as does the timing and structure of the deal. Your tax position is very different depending on whether you’re buying a business yourself or through a company. It can often be more tax efficient to buy it through a company rather than raising money personally.
To put this into context, let’s assume you’re a higher rate tax payer and you need to raise funds of £500,000 to buy a business. If you raise the money yourself, then you would have to repay the loan out of your taxed income and this could mean an extra income tax liability for you of £240,000. This effectively increases the price of your acquisition by 48% and it can often be avoided completely with good tax planning.
Similarly, your tax position is very different depending on whether you’re buying a limited company or just the trade and assets of a business.
Other considerations include:
- using funds in your other companies to finance the deal in a tax efficient way
- protecting your existing businesses and personal wealth
- minimising stamp duty, VAT, personal tax and corporation tax
- maximising capital allowances, especially if there’s a property included in the purchase
- maximising other reliefs available to you to reduce your tax moving forward.
So if you’re thinking of acquiring, do please get in touch with Michael Burgess on 01782 279615 before you make any approaches.