Selling a business: Is tax relief available?

Although it could make you some money, selling a business can be an expensive process. There are a number of significant costs involved in sorting and marketing your business, as well as the costs involved in dealing with the sales paperwork. And that's without considering the taxes you may have to pay upon a successful sale.

Thankfully, many small business owners actually qualify for tax relief when selling their business, which could reduce your tax liabilities and soften the blow as you embark upon your next chapter.

Capital Gains Tax (CGT) Relief

One form of relief available on CGT is Entrepreneurs' relief, which reduces the rate of CGT to just 10 per cent instead of the normal 20 per cent. There is, however, a lifetime limit on this relief, so ensure you have not claimed Entrepreneurs' relief on more than £10 million over your lifetime before applying.

In terms of whether you qualify, Entrepreneurs' relief can be applied to unincorporated businesses or personal trading companies as long as they meet the government's criteria, so it's worth contacting an expert in advance to see if you can organise your business in accordance with them.

If you do not qualify for Entrepreneurs' relief, don't forget that there are other forms of CGT relief such as roll-over relief. If this applies to your sale, CGT can be deferred so the money you would have paid can be reinvested in new assets. You will then pay the CGT you owe when you sell the new assets.

Additionally, hold-over relief may apply. This form of CGT relief makes it possible to defer the payment of CGT if you are giving your business away to, for example, children rather than selling it. Often it is automatically applied when a business is transferred to your spouse, but make sure you check your position before assuming you are not liable.

Corporation Tax

If you trade as a company then it's possible that you will choose to sell your business via assets, such as land, property or equipment. This could include a full asset business sale or only a partial sale, which you may choose to do to fund business growth or boost your pension. However, it is possible that you can be charged corporation tax on the gains you make from your asset sale, assuming they don't qualify for roll-over relief.

If this situation sounds like it may resemble yours, then you'll need to consider whether assets is the right choice for you. Discuss with your financial adviser the possibility of adjusting the way you're splitting or selling your business to establish whether you could take a different path, and so save yourself a significant amount of tax.

How much could I actually save?

There is no definitive answer to the question of whether you and your business will qualify for tax relief, so the more efficient approach to saving yourself money is to ensure you contact an expert well in advance of your sale. Discuss with them your reasons for selling the company and what financial goals you want to achieve once the sale has gone through. They will then be able to establish the most cost-effective means of you achieving this without putting yourself in hot water with HMRC.


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"smtp"
MAIL_HOST
"smtp.mailtrap.io"
MAIL_PORT
"2525"
MAIL_USERNAME
"null"
MAIL_PASSWORD
"null"
MAIL_ENCRYPTION
"null"
PUSHER_APP_ID
""
PUSHER_APP_KEY
""
PUSHER_APP_SECRET
""
EMAIL_TESTING
"true"
COMPANIESHOUSE_KEY
"u82ND42fnkdYxqCH945hvlmaflxDPIyT2sMcWLrj"
Key Value
APP_NAME
"Laravel"
APP_ENV
"local"
APP_KEY
"base64:6coDXzCRsacXGmkPvjvAXO03DG2dJJdkX6rr1+rpvVg="
APP_DEBUG
"true"
APP_LOG_LEVEL
"debug"
APP_URL
"http://localhost"
DB_CONNECTION
"mysql"
DB_HOST
"127.0.0.1"
DB_PORT
"3306"
DB_DATABASE
"bizsale_db"
DB_USERNAME
"bizsale_admin"
DB_PASSWORD
"+fUTe#g#3."
BROADCAST_DRIVER
"log"
CACHE_DRIVER
"file"
SESSION_DRIVER
"file"
SESSION_LIFETIME
"120"
QUEUE_DRIVER
"sync"
REDIS_HOST
"127.0.0.1"
REDIS_PASSWORD
"null"
REDIS_PORT
"6379"
MAIL_DRIVER
"smtp"
MAIL_HOST
"smtp.mailtrap.io"
MAIL_PORT
"2525"
MAIL_USERNAME
"null"
MAIL_PASSWORD
"null"
MAIL_ENCRYPTION
"null"
PUSHER_APP_ID
""
PUSHER_APP_KEY
""
PUSHER_APP_SECRET
""
EMAIL_TESTING
"true"
COMPANIESHOUSE_KEY
"u82ND42fnkdYxqCH945hvlmaflxDPIyT2sMcWLrj"
0. Whoops\Handler\PrettyPageHandler