Matrimonial dispute tax advice
Appointment Type: Party appointed expert
Service Area: Divorce and Matrimonial Matters
Sub-category: Food beverages
Litigation Type: Matrimonial
Size of Case: £2.5 million - £10 million
Instructed as a shadow expert in a matrimonial case by the husband (respondent) to review the single joint expert valuation report which had been submitted to the court and to provide tax advice with regards to the transfer of assets.
There were several complications in this case. The most significant being that the husband had carried out a recent MBO and had subsequently transferred a proportion of his shares to his wife following completion.
The articles of association of the company stated that the sale of shares by a company shareholder should be at fair value and take no account of a minority shareholding discount unless an alternative price is agreed between the parties. However, there is an argument that any value agreed at less than fair value would be substituted by HMRC when calculating the capital gains tax due on sale of the wife’s shareholding.
Due to this clause in the articles of association and other considerations regarding liquidity the husband instructed us to consider the cash and tax implications for himself, his wife and the company in two different scenarios:
1. The husband re-purchases the shares from his wife; or
2. The company re-purchases the shares from his wife and the shares are subsequently cancelled.
These calculations were further complicated by the fact that the company was not solely owned by the husband and wife, as there were independent third parties who were also shareholders. We therefore noted in our advice that whilst the husband was the majority shareholder any voting decision to declare dividends by the Company would lawfully result in the other shareholders also being due remuneration by way of dividend.
The calculations were subsequently provided for both options on the basis of full market value being paid on an agreed lower amount and the subsequent capital gains taxes that would be due.
Our advice was successfully used by the parties to reach an agreement and implement the required transactions in the most efficient manner.