There are a number of possible ways in which shares in a company can be sold and there are CGT issues to think about on each one. Bear in mind that a disposal takes place for CGT purposes when there is a binding contract for sale and not the date on which the deal is completed. This can be a significant factor where a deal is being contemplated around the end of a tax year.
The simple answer is yes provided you are prepared to be out of the UK (apart from visits averaging no more than 90 days per tax year) for at least five whole UK tax years. If you come back to the UK too soon, the tax bill on the sale of the shares will come home with you. It is sensible to put the tax on deposit for the five years as an incentive to stay abroad. Also remember to take advice on the tax position in the country you plan to live in. Most other countries have a tax year which is calendar year based and the liability you are carefully avoiding in the UK could come home to roost somewhere else.
An exchange of your shares for shares in the purchasing company is not usually a disposal for CGT purposes. You now have the new shares at the price you paid for the old. As there is no disposal for CGT, taper relief has not been triggered. If the new company is a quoted company and you have less than 5% of the shares in that company, you may prejudice the business asset taper that accrued on your old shares.
If you exchange your shares for loan notes, taper relief considerations also come into play if the loan notes are not qualifying corporate bonds (for example, not denominated in sterling or not carrying a commercial rate of interest).
An ‘earn out’ involves deferred consideration, for example, cash now plus more cash if certain targets are achieved by the company within a defined period. The CGT rules on such a disposal are complicated but with some careful planning maximum advantage can be taken of business asset taper.
If no one else will buy your shares it may be possible for the company to buy back its own shares provided that it has sufficient reserves to do so. Normally a buy back is treated as an income distribution but provided a number of conditions are all fulfilled, the buy back can be treated as a capital distribution and the benefit of business asset taper relief may be obtained. Particular care must be taken in situations where cash resources are insufficient to buy back the shares.
When shares in a company are sold, careful planning may have ensured that CGT liability was minimised. However, you must also bear in mind that an IHT problem will usually emerge. This is because shares generally qualify for what is known as business property relief (BPR) which is worth 100% of the value of unquoted trading company shares. The relief is not available for cash. So the day before a sale there is no IHT problem, the day after a sale there could be an enormous IHT problem.