In July 2020, the Chancellor requested The Office of Tax Simplification (OTS)
to consider how capital gains tax (CGT) distorts behaviour or fails to meet policy intent. In November the OTS published its report, Capital Gains Tax Review – first report: Simplifying by design.

The report makes 11 recommendations including considering more closely aligning CGT rates with Income Tax, and addressing boundary issues between CGT and Income Tax.

Given the country’s finances have been so strongly impacted by Covid-19 and with a budget deficit predicted to balloon to £400bn, it is very likely that taxes will go up in the March budget; it is just as likely that the OTS report provides a few clues as to what we can expect to see.

If you’re looking to sell your business and would like the certainty and benefits of the current CGT regime, you will need to get your house in order and sell before the budget is delivered in March.


The key stages to selling your business are as follows:

Preliminary stages
Sellers will usually require a buyer to sign a Confidentiality Agreement agreeing to keep information that is disclosed to the buyer about the company confidential.

It is also common for the key terms of a transaction, such as when the completion date will be, price being paid for the target company’s shares and other case specific essentials, to be set out in a document known as the Heads of Terms or Letter of Intent.

Due diligence: commercial, legal and financial
Due diligence is the information gathering process carried out by a prospective buyer to find out as much information as possible about the target company early in the transaction negotiations. This may then be used to knock down the initial price in the letter of intent.

Share purchase agreement
The terms that govern the sale of the shares. The purchase price will set out any deferred consideration and payment schedule if applicable. The buyer will usually draft the first version and the seller will want to pay special attention to the warranties and liabilities. The warranties can be disclosed against (see disclosure letter below), and the liabilities will need to be negotiated so that the seller’s liability is limited in the event the buyer brings forward a claim.

Deferred consideration
When money is to be paid after completion, thought must be given to ensure payment ie that the buyer will be able to pay and pay on time. One way to ensure payment is to put the deferred consideration into an escrow account which cannot be touched by the seller until the deferred payment date. Another option is to take security over the buyer’s asset(s).

Disclosure letter
The warranties are factual statements that reflect the “perfect” company eg a statement that there is no litigation. It is in the interests of the seller to disclose against the warranties and provide the information where it conflicts with the warranties. The reason behind this is that if the buyer brings a warranty claim, it will only be able to do so where it is outside of the warranties ie if there is litigation and the seller did not disclose this then the buyer would be able to claim for this against the seller.

Additional documents
Consider whether there are any change of control clauses or consent is required from a landlord or any assignment of intellectual property is required. Service, employment or settlement agreements will need to be negotiated, if relevant.

Signing and exchange
There can be a split exchange and completion (like selling a house) where the parties sign the agreement but completion does not happen until a later date, for example if a charge is to be satisfied. More often, it occurs simultaneously.

Completion and Post-completion
Payment is usually made on completion (other than any deferred consideration if relevant). Post-completion will involve the filings of forms at Companies House eg change of directors and updating the company books. 


Contact Chris Simmons or any member of the DMH Stallard corporate team in Gatwick, Guildford or London for more information. 

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