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Please what is the difference between sales of a companies shares and sales of a company’s trade and asset for the purpose of capital gains for both individual and companies.
When a company sells his shares, I understand the company is now owned by the shareholder who has bought the shares.
How is this then different when a company sells its trade and asset. Are both the same?
A sale of shares in a company is made by the shareholder owning those shares who may be either an individual or another company. This sale results in a gain arising on the shareholder to be chargeable to CGT if the shareholder is an individual or to corporation tax if the shareholder is a company – and the shares in the target company pass to the new shareholder and that company continues to trade but under new ownership – the company itself has not ceased to trade!
If however a company sells its assets and trade then the company ceases to trade and the corporation tax implications of each asset sold must be dealt with – for example gains on chargeable assets and balancing adjustments for capital allowance purposes. The sale will bring in cash to the company which will be used to pay off all the liabilities of the company with the remaining cash then being distributed to the shareholders and the company is liquidated.
The buyer (usually in this situation another company) does not acquire shares but acquires the assets and trade directly into that buying company,
This is a subject that would be covered in Advanced Tax!
Thank you. I am actually studying towards ATX.