Selling and exits

The shareholders can sell their shares in the holding company, so the buyer takes the whole group. The holding company can sell a trading subsidiary and keep the proceeds. Part of the group can be split off first and the rest sold. Other routes include a sale to the management team or an employee ownership trust, or winding the company up. Each is taxed differently.

Ideally two years or more. Business Asset Disposal Relief needs its conditions met throughout the two years before a share sale, and the substantial shareholding exemption needs the holding to have lasted at least 12 months. Changes made under time pressure, with a buyer already in view, are also more likely to attract HMRC's attention. Starting early leaves more options.

Expect questions about how the group was formed and whether each step was properly documented: the share exchange agreement, any HMRC clearance, stamp duty adjudication, Companies House filings and intercompany balances. The buyer will also review tax returns and any open HMRC enquiries for every company. Gaps can lead to price reductions, retentions or extra indemnities, so tidy them up before marketing the business.

Yes. A holding company can sell one subsidiary while keeping others, and the gain may be exempt under the substantial shareholding exemption if the conditions are met. If the part you want to keep is inside the company being sold, such as property or surplus cash, it usually has to be moved out first, and that step needs planning in its own right.

It stays in the holding company until you decide what to do with it. You can reinvest it in a new venture, invest it, or take it out over time as dividends, which are taxed at dividend rates when paid. Winding the holding company up is another route, with its own rules. The best choice depends on your plans and how soon you need the money.

Buying the trade and assets lets a buyer pick what it takes on, leave historic liabilities behind and, in some cases, get tax relief on what it pays. Sellers generally prefer a share sale, because selling assets out of a company and then extracting the proceeds can mean two layers of tax. The final structure often comes down to negotiation and price.

It depends on how it's structured. A fixed amount paid later, an earn-out linked to future profits, and loan notes or shares from the buyer are each taxed in different ways and at different times. Some can mean paying tax on money you haven't yet received. Agree the shape of the consideration with tax advice before heads of terms are signed.

Yes, and buyers often want founders to stay for a handover period. Any salary, bonus or consultancy payment for that work is taxed as income, not as part of the sale price. Care is needed where payments depend on staying in employment, because HMRC can treat part of the price as earnings. The sale agreement and service agreement should be drafted with that in mind.

Taking shares or loan notes from the buyer can allow the gain on that part of the price to be deferred until you sell the new shares, provided the reorganisation rules apply. HMRC clearance is often sought. The catch is that sale reliefs may not be available later on the new shares, so you may need to decide whether to elect to claim relief at the time of the sale.

Not necessarily. Each shareholder is taxed on their own gain, and reliefs depend on their own circumstances. For example, Business Asset Disposal Relief generally needs the shareholder to have been an officer or employee of a group company for two years, so a spouse or child who holds shares but doesn't work in the business may pay a higher rate than the founder.

Individual shareholders report the gain on their Self Assessment return for the tax year of the sale and pay the tax by 31 January after that tax year, claiming any relief such as Business Asset Disposal Relief. Where a holding company sells a subsidiary, the gain or exemption is dealt with in its corporation tax return. The substantial shareholding exemption applies automatically if its conditions are met.

The structure stays in place. A holding company, a property company or a separated investment company usually has value whether or not a sale goes ahead, which is one reason to restructure for its own commercial benefits. Where HMRC cleared a restructure on the basis that a sale was intended, check whether anything in the application needs revisiting before you act on the new plans.

They do different jobs. A corporate finance adviser prepares the business for sale, finds buyers, manages the process and negotiates the price and terms. A tax adviser makes sure the seller's structure, the form of the consideration and the order of any pre-sale steps keep as much of that price as possible. The best results come when they work together early.

A tax covenant is a promise by the sellers to pay the buyer for tax liabilities that relate to the period before the sale but come to light afterwards. It's standard in share sales, alongside tax warranties. The sellers' exposure is usually capped and time-limited. A clean, well-documented tax history across every group company makes the negotiations on these clauses easier.

This site focuses on how holding companies and groups affect a sale. For a broader guide to selling, including deal structure, earn-outs, management buy-outs and the seller's timeline, see our sister site Transaction Tax Partners at transactiontaxpartners.co.uk. For splitting a group before a sale, see Demerger Tax at demergertax.co.uk. The same ASWATAX team is behind each site.