TAX TIP OF THE WEEK - Had a fall out with your business partner and looking to split it, what is the most tax efficient way you can do this?

It’s an all too common scenario where friends start a business and all is well for a few years. After which they start having different ideas about the direction the business should take or concerns about who is contributing the most, so on…

Now it could either be that one partner decides to buy the other out via share purchase. However, the difficulty can arise where they both want to carry on the business but separately.

They could consider distributing the assets between them, but there can be difficulties valuing the assets and there is like to be a significant tax charge to the shareholders.

So what is the best way to split the business? One possible way is to use demerger relief, this allows a company to divide and transfer its trade to two or more other companies without triggering a tax charge.

The main criteria are that the new companies are located in the UK and they are trading companies.

Hope this was helpful, for lots more tax tips and strategies get a copy of our 71 ways to save tax checklist