Selling a business is an intricate and often exhausting process that requires a lot of attention to detail. Understanding the tax liabilities that are generated from the sale of shares, brand and business assets is one of the most important factors to acknowledge. Transactions like these that result in a gain or profit generate Capital Gains Tax (CGT), Business asset disposal relief (BADR) and potentially Corporation Tax (CT). In order to reduce the likelihood of costly decisions that reduce the potential profit made from a sale, it is advised to seek professional help. A tax professional in the accounting world will understand the tax on the sale and help to maximise the financial gain on the transaction.
Selling a business is an intricate and often exhausting process that requires a lot of attention to detail. Understanding the tax liabilities that are generated from the sale of shares, brand and business assets is one of the most important factors to acknowledge. Transactions like these that result in a gain or profit generate Capital Gains Tax (CGT), Business asset disposal relief (BADR) and potentially Corporation Tax (CT). In order to reduce the likelihood of costly decisions that reduce the potential profit made from a sale, it is advised to seek professional help. A tax professional in the accounting world will understand the tax on the sale and help to maximise the financial gain on the transaction.
Capital Gains Tax
Understanding CGT will enable you to confidently work out your tax liabilities. CGT is the tax applied on the profits that are generated from the sale, not from the total sale value.
For example, a business is purchased for £500,000, and some years later it is then sold for £750,000. The CGT will only be applied to the profit from the sale, therefore the potential taxable amount is £250,000. The tax-free allowance can also be taken advantage of. The annual exemption from CGT is £12,300, and this amount will not be subject to tax. Therefore the final amount taxable is £237,700.
If a profit like this occurs from a commercial property sale, the tax implications are dependant:
- 10% if you are a basic rate taxpayer in the year in which you dispose of the asset(s)
- 20% if you are a higher rate taxpayer in the year in which you dispose of the asset(s)
Basic rate tax liability: £237,700 @ 10% = £23,770
Higher rate tax liability: £237,700 @ 20% = £47,540
Delaying or reducing your tax liability is a possibility due to reliefs and allowances available. When selling your business, you may qualify for tax relief through Business Asset Disposal Relief (BADR). BADR allows you to reduce your tax rate to 10% on gains, should you be able to qualify for this relief. There are a number of other reliefs and allowances that have their own rules for qualifying, which can be extremely complicated. This is why it is advised to consult with a tax professional. They have knowledge of all kinds of tax benefits that are available to your business when selling. They do charge for their services.
If you’re wondering where the best and easiest place to sell your business would be, then look no further. At FastCash4Houses, we can buy any business at a time that suits you. Whether it’s retail or professional services, if you are making a profit or not, we can provide you with many options to exit, without the difficulty or the usual fees associated with selling a business. If you are interested in finding out more, visit our website https://fastcash4houses.co.uk/ or contact a member of our team who will be more than happy to help at [email protected] or 01204 294356. At FastCash4Houses, we are here to support you every step of the way in selling your small business.
