3 things to know about tax when selling business assets

As a business owner, you may at some point be in a position to dispose of a capital asset, such as a share of a business or a property for example. However, more often than not, we find business owners perplexed by the different legislation surrounding selling capital assets.

That’s why we’re on hand to advise you on the complex issues and have put together 3 things you need to know before selling a capital asset. Knowing this will help you, as the business owner, ensure that maximum relief is obtained were available.

1. Considering Capital Gains Tax

When you sell a business asset, capital gains tax needs to be considered. The gain or loss is calculated by taking the sale proceeds and deducting the purchase price.

There are different rates of capital gains tax. Currently, the standard rate is charged at 10%, with the higher rate of 20% being applied where the gain takes the individual into higher rates.

In addition to these rates, if the disposal is of residential property, then the rate is 18% for those within the basic rates tax band, and 28% for those who are within the higher rate of tax.

Capital Gains Tax can often be a complicated affair, and so it is highly recommended that you consult with a specialist advisor before proceeding with disposing of your asset.

2. Reducing your Tax Liability

It is important to try and reduce your tax liability when you are looking to dispose of an asset, and you can do so by looking at what tax reliefs are available.

For example, if the asset which has been disposed of is regarded as a business asset, then you may be able to claim Entrepreneurs’ Relief, which would, in turn, reduce the rate of tax to 10%. Careful planning is required to ensure all of the detailed conditions are met for ER, as the relief only applies to gains arising on a disposal of:

● A trading business of an individual or partner,
● Shares in a trading company, or holding company of a trading group,
● Assets used by a business or a company

Other reliefs may also be available and need to be considered such as private residence relief and lettings relief for residential property

Rollover relief may be available if the proceeds are reinvested or holdover relief may be claimed if assets have been gifted.

3. Tax Planning

You should always remember that with Capital Gains Tax, there won’t be any tax liability if the gain is less than £11,300 per individual. However, trustees will only have £5,650 as an annual exemption.

When exploring your options for tax planning, it is always important to remember the following:

● Transfers between spouses or civil partners can be made tax free.
● Involve your tax adviser at an early stage to ensure that the small print in any agreements does not result in the loss of any reliefs

Where can I go for more information?

Our team is on hand to provide you with assistance in disposing of your capital assets and you can contact us for support.

We’ve also put together a set of frequently asked questions for those who may have more queries about selling an asset and Capital Gains Tax.

If you’re still not sure, then let’s talk. Simply fill out a contact form to get in touch with our team of experts!