Investing the Earnings Gain in Acquisition
Assets Acquisition: Under Section 152 of the Taxation of Chargeable Gains Act of 1992 (TCGA 1992), roll-over relief from CGT/corporation tax is available on the sale of qualifying assets (including land, fixed plant, and machinery) used in the trade, provided that the proceeds of the sale are used to purchase additional qualifying assets. The relief works by converting the gain into the replacement asset, delaying any CGT or corporate tax liability until the replacement asset is sold (without itself being replaced). When a corporation sells a division and plans to buy new assets to expand other businesses it operates, this tax savings frequently makes an asset sale seem appealing. Shares: private vendors For the purposes of the aforementioned roll-over relief, shares are not qualified assets. An individual shareholder, however, will be entitled to claim a deferral relief if they subscribe for shares that are eligible for the Enterprise Investment Scheme (EIS) after reinvesting a chargeable gain from the sale of shares (or really any gain). Shares: commercial vendors A corporate seller who reinvests a chargeable gain in shares is not eligible for deferral relief on reinvestment in EIS shares. The sale by firms of sizable stakes in trading companies, as was already indicated, results in capital gains that are not subject to tax.
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