๐Ÿ“ Tax election letter

About this category

A tax election letter is a document that allows a taxpayer to elect how they would like to be taxed on a particular issue. This could include choosing to be taxed as an individual or an LLC, or electing to file as married filing jointly or separately.

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๐Ÿ“ Tax election letter

templates

Section 138A Election Letter (Business Asset Disposal Relief And Earn Outs)

The Section 138A Election Letter (Business Asset Disposal Relief And Earn Outs) under UK law is a legal document that pertains to the sale or disposal of business assets. It outlines the electing party's intention to utilize the Business Asset Disposal Relief (previously known as Entrepreneur's Relief) in conjunction with earn outs, a financial arrangement where the buyer pays the seller in installments based on the business's future performance.

This template serves as a formal letter, indicating the electing party's decision to elect the section 138A provisions as per the UK tax legislation. It includes specific details related to the relevant transaction, such as the parties involved, the nature and value of the assets being disposed of, and the proposed earn-out structure.

Furthermore, the template may include clauses that address essential provisions and conditions for the utilization of Business Asset Disposal Relief and earn outs. This may cover aspects like the calculation and payment terms of the earn-out, obligations and responsibilities of both parties, dispute resolution mechanisms, and any necessary consents or waivers required.

By using this template, the parties involved can document their intentions in a legally binding manner, ensuring compliance with the UK tax regulations and providing transparency and clarity regarding the sale or disposal of business assets. It enables the electing party and relevant stakeholders to structure their transaction efficiently, taking advantage of applicable tax relief and providing a clear framework for earn-out arrangements.
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Associated business activities

Election to disapply

The main reason for wanting to disapply the election is to avoid having to pay any capital gains tax on the sale of the property. If the property is sold within two years of the date of the election, any gain made on the sale would be subject to capital gains tax. However, if the property is held for longer than two years, any gain made on the sale would be exempt from capital gains tax. Another reason for wanting to disapply the election is to avoid having to pay stamp duty land tax on the purchase of the property. If the property is purchased within two years of the date of the election, the purchaser would be liable for stamp duty land tax on the purchase price.