If You Sell Your Business, What Is The Tax Rate?

When selling a business, cost implications can make or break the decision to go ahead. There are many factors to consider when figuring out a tax liability, such as whether you’re a standard or higher rate taxpayer. Here we will discuss some tax implications that will arise when you look to sell your business. Firstly, how will the buyer acquire the company; through a share sale or through an asset sale?

Asset sale

An Asset sale is exactly what you would assume it is, where the buyer purchases only the assets of the company such as buildings, plants, and machinery, and/or products in storage, etc. Selling in this way can result in a double tax charge for sellers, they can also be more complicated as each asset sale can have different tax consequences.

Share Sale

A share sale is slightly different. This is buying the business, or share of the business, as a whole. This will pass all responsibility, debt, and potential profit to the new owner, and all assets, liabilities, and obligations are transferred too. There is greater due diligence required for share sales as it covers every aspect of the business, all these aspects will require thorough investigation to confirm their existence and value, in order to be sure that the purchase price is reasonable and fair.

As a generality, share sales are favoured to the seller as they can avoid a double tax implication and give the potential for certain tax reliefs – such as business asset disposal relief. However, a buyer may favour an asset sale as the liabilities associated with the business remains with the previous owners.

Business Asset Disposal Relief (BADR)

Formerly known as Entrepreneurs relief, this allows you to pay the lower rate of 10% Capital Gains Tax on any qualifying gains. BADR can be claimed by company Directors, Sole Traders, Partners, and Employees of Companies. As of March 2020, you can claim up to £1 million of relief in total during your lifetime, this has been reduced from a previous value of £10 million. If you do not qualify for BADR you may qualify for other forms of relief, it really depends on what type of business you run and many other contributing factors. This is why it would always be recommended to consult with a tax professional regarding these situations. They will have an in-depth knowledge of all kinds of tax benefits available that will apply to your business when selling. They do charge for their services.

If you are looking to sell your business, FastCash4Houses can make the process easier than ever. Whether you are in retail or professional services, regardless of the size, location, and profitability, we can provide a stress-free evaluation and an offer based on anything from the value of the company to business assets. To get your free no-obligation valuation today and to find out more about how we can help then visit our website at Alternatively, to speak to a member of our team you can call them directly on 01204 294356. At FastCash4Houses, we are here to support you every step of the way.

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How to sell a leasehold business

Yes, a leasehold business can be sold. A leasehold business is a business with a lease agreement in place for a property which is used