According to sources as reported by Bloomberg, the Glazer family, who own Manchester United Football Club, are open to selling a stake in the club.
but how will they structure a sale and what the might the tax consequences of that sale be.
The U.K.-based football team has been embroiled in controversy since its takeover by Malcolm Glazer and his family two decades ago. Fans of the football club are calling for a change of ownership
According to sources, Britain’s richest man, Sir Jim Ratcliffe wants to buy the whole club. But, the Glazers do not want to sell. However, it is reported that the Glazers have held preliminary talks with potential investors about taking on a minority holding in the club.
Whilst the Glazers are US citizens, the US currently taxes its citizens on their worldwide income. As such, we thought it might be helpful to remind the Glazers (and you!) of some of the key tax considerations on sale of a business.
If the sale is structured as a business asset sale, then you will need to consider not just the value of the tangible assets such as land and buildings. But also the value of any intangible assets such as goodwill, trademarks and the like.
Manchester United is of course one of the best-known and most successful clubs in world football. The club has won a record 13 English Premier League titles and has consistently been able to attract the game’s biggest stars. Including the likes of Cristiano Ronaldo, Paul Pogba and Zlatan Ibrahimovic Goodwill associated with the Manchester United brand certainly won’t come cheap. The tax to pay as a result could be significant. For more information on the mechanics of the corporate intangible assets regime see here.
One of the most valuable reliefs for those considering selling a business is Business Asset Disposal Relief (BADR). Previously known as ‘Entrepreneurs’ Relief.’
Where BADR applies, the seller will pay a lower rate of CGT (10%) on the first £1 million of gains. For most people this can bring significant tax advantages. Especially if you are a higher or additional-rate taxpayer who would normally pay 20% CGT on most assets. As commentators have indicated that a sale could value the football club at more than $6 billion, £1 million will only be a small drop in the ocean for the mega wealthy owners of Manchester United. Why not read our recent article top tips on passing on a family business for more information.
Given the substantial sums involved in the potential sale of even a minority stake in the football club, a potential buyer may need to negotiate an element of deferred consideration or some form of earn out.
This is where the tax analysis becomes really complex. Without specialist advice the unwary can fall into significant tax traps. We outline more in our article highlighting some of the main tax considerations on structuring consideration payments.
It is anticipated that the club would likely attract a host of big-name investors. Similar to Chelsea FC, whose sale was a £4.25 billion deal to American billionaire Todd Boehly & private equity firm Clearlake Capital.
But if Mr Glazer does not like the look of any his buyers, he could always consider a sale to his employees. Through a vehicle such as an employee ownership trust (EOT). This structure has become increasingly popular over recent years. However, it requires careful tax planning to ensure that the tax advantages of such a structure are protected. See our short guide to EOTs for more information.
Sufficed to say that getting tax advice at an early stage in a transaction can save a lot of money, (particularly if you happen to have a business valued at more than $6 billion!! But even if your business “isn’t quite” worth $6 billion seeking specialist help can still lead to substantial tax savings.
At ETC Tax we have significant experience in all aspects of exit planning, including structuring a business for a sale. If you are thinking of selling your business, like the Glazer family, please do get in touch.
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