Business owners that choose to sell or dispose of a business will face a number of tax challenges, which is why it is important to always plan ahead strategically and seek specialist advice at an early stage.
First things first, it is important to be aware of the rules governing Capital Gains Tax (CGT) in the UK.
This is a tax that sole traders, self-employed business owners and business partnerships will incur on all ‘gains’ when selling or disposing of a business asset, such as land and buildings, plant and machinery, or even the entire business itself.
Fortunately, there are a number of CGT reliefs available to business owners, such as Entrepreneur’s Relief (ER) which can make for some significant tax savings.
ER enables business owners to pay a lower rate of CGT upon the sale or disposal of a business. In instances where ER applies, the rate of CGT paid can be reduced to just 10 per cent. In order to qualify for ER, however, the business must be either a personal trading company or an unincorporated business. On top of this, a number of complex qualifying conditions need to be met.
The rules governing ER are notoriously complex and confusing, which is why it is important that business owners seek tailored advice in this respect, as circumstances will always differ from one firm to another. This is crucial, as the sale needs to be structured in the correct way from the very outset.
If ER is not appropriate, there are plenty of other ways that business owners can benefit from substantial CGT savings when selling or disposing of a business.
Depending on future intentions, it might be worth exploring roll-over relief, which enables sellers to defer CGT if their gains from a sale are to be reinvested in new business assets, or hold-over relief, which can defer CGT in instances where the business or asset is being ‘transferred’ to a sibling or other family member as opposed to being sold.
Seeking specialist advice
Circumstances will always differ on a case-by-case basis, which is why it is crucial to seek tailored tax planning advice, in order to ensure that your business disposal will be as tax-efficient as possible.
Here at Lamont Pridmore, we have helped hundreds of businesses with the complex issue of navigating the CGT maze over the years.
To find out how our expert team can help you, please contact us today.