Business sale - 30million, 6% tax?

[DaveCWK]

There was a caller on LBC the other day who stated he sold his software company for £30million & only paid 6% tax:

https://twitter.com/LBC/status/1679909012211646465

Is this actually the reality of the level of tax you pay on such a sale?

[Biggy Stardust]

You pay tax on profit rather than turnover, surely?

What was the profit rather than the sale price?

[Sheepshanks]

DaveCWK said:

There was a caller on LBC the other day who stated he sold his software company for £30million & only paid 6% tax:

https://twitter.com/LBC/status/1679909012211646465

Is this actually the reality of the level of tax you pay on such a sale?

On the face of it, his claim makes no sense - but there’s not much to go on.

Entrepreneurs' relief (now Business Asset Disposal Relief) is 10% but it only applies to £1M - above that is CGT, although I think at reduced rates.

Edited by Sheepshanks on Sunday 16th July 10:41

[Olivera]

Sheepshanks said:

On the face of it, his claim makes no sense - but there’s not much to go on.

Entrepreneurs' relief (now Business Asset Disposal Relief) is 10% but it only applies to the £1M - above that is CGT, although I think at reduced rates.

He seemed remarkably ill informed at how the 6% figure was arrived at, so I'd say he's either clueless or a fantasist. His comment of it "putting him in the top 1%" would reinforce this.

[stuthemong]

It’s an interesting claim, not easily achieved that I can see without either offshoring stuff or possibly lobbing most in some sort of trust or shinanngans.

It’s 20% to dispose of capital gains after the first 1m@10%, so it should have been £5.9m in tax off the 30 if you don’t want HMRC to ever be able to take an interest.

Personally I’d pay the extra 14% tax and sleep better, unless I lived offshore a lot.

[768]

Olivera said:

He seemed remarkably ill informed at how the 6% figure was arrived at, so I'd say he's either clueless or a fantasist. His comment of it "putting him in the top 1%" would reinforce this.

Yeah. I wondered if it was a staged sale over multiple years and 6% was just the first year's hit versus the total value. But quickly concluded it wasn't really worth thinking about because he clearly didn't have a scooby what was going on, somewhat remarkably.

[scenario8]

For those of us that didn’t listen, what was the point of the call/segment/show?

With my (limited) knowledge I can’t see how the claim can have been achieved. Has it been confirmed at all?

Was the contributor a verified guest or simply a “caller”. I’m always sceptical about callers on radio phone-ins.

[768]

stuthe said:

It’s an interesting claim, not easily achieved that I can see without either offshoring stuff or possibly lobbing most in some sort of trust or shinanngans.

If it's something dodgy I bet his accountant really appreciates him phoning in.

[pquinn]

It's all made up bullst so don't worry about it.

[franki68]

I sold my business and paid about 10% but this was 20 years ago and I’m fairly sure laws have changed since then .

[22]

Man exaggerates and numbers don't stack up shocker.

[Doofus]

Perhaps it was a £30m valuation, but he only got £5m in cash and the rest was equity.

It's very unlikely he'd have got the full payment in one go. At least 20% would have been held back for at least 2 years, if the buyer had any sense.

[stuthemong]

768 said:

If it's something dodgy I bet his accountant really appreciates him phoning in.

For sure - I mean I’d not be broadcasting that tax rate if as described.

https://www.taxpolicy.org.uk/investigations/

Is a great website, this guy exposed the ex chancellor of the exchequer, Zahawi, after exposing an “atypical” tax structure, shall we say.

If you get creative, you’d best keep your head low or be non-domiciled. Dialling in and broadcasting 6% as some sort of faux-morality play is bizarre. Pay the tax at the correct rate, or if you play games, accept that you’re not working within the spirit of the law and that’s hardly a strong moral place to preach from. I’d have a lot more time
If he’d paid his 20% and held the same view.

[pquinn]

It's not like there aren't plenty of moralising tax dodgers out there preaching at everyone else to hand over their money, but this does sound a bit made up doesn't it?

[MrJuice]

It could have been 6% and even less. What if he plonked himself in Swiss for a time? I know someone who has done that and not paid PAYE or corp tax to the UK or Swiss for years. His income is basically anything his company makes without any tax deductions. This is for a UK company

Obvs he pays vat but that is just him passing on what he's collected on behalf of the govt

So it is entirely possible

[M1AGM]

The tax code is full of oddities. When I sold my first business a few years ago here in the UK I was taxed at the prevailing rate. A NZ couple who lived, procreated, owned property and setup a company in the UK, sold their business to the same acquirer at the same time (for more money) and paid a much reduced rate because they were not Brits. I always thought it was grossly unfair that nationality was used to determine taxation but it is what it is. It could be something like this, or from the headline more likely a share option scheme set up at the beginning to fix the value of the shares at a lower rate for future tax purposes.

[Sheepshanks]

MrJuice said:

It could have been 6% and even less. What if he plonked himself in Swiss for a time? I know someone who has done that and not paid PAYE or corp tax to the UK or Swiss for years. His income is basically anything his company makes without any tax deductions. This is for a UK company

Obvs he pays vat but that is just him passing on what he's collected on behalf of the govt

So it is entirely possible

Bearing in mind Switzerland has the same sort of taxes as the UK it's hard to imagine how that's true. One thing I've learned amongst business owners is that it's not unusual for them to make fairly wild claims about things they do. Either they're just bullstting or they really think it's true but behind them is an accountant keeping everything above board.

[MrJuice]

Nope

Swiss don't care about foreign income. And if you're employed by a UK company but living in Swiss, no paye or NI due.

[Sheepshanks]

MrJuice said:

Nope

Swiss don't care about foreign income. And if you're employed by a UK company but living in Swiss, no paye or NI due.

How does his UK company not pay corp tax in UK?

[MrJuice]

Cos it doesn't make any money

Cos he pays himself a salary equivalent to whatever the company makes