A limited company has 20 shares split equally by two shareholders. One of the shareholders wishes to retire and have no further connections with the company. In this situation, is it best to cancel the 50% of the shares of the retiring shareholder rather than transfer to the continuing shareholder who is going to continue in the business? Or is there another option available? 

Arthur replies: 

If the conditions for business asset disposal relief are fulfilled, it may not be such a bad option to transfer their 50% of shares to the other shareholder – because then the capital gains tax rate will be 10%. However, the other shareholder may be unable or unwilling to pay for the shares. They should consider speaking to a tax adviser about the possibility of doing a 'company purchase of own shares'.