How much of your sale proceeds you actually keep depends heavily on tax, and on how far ahead you plan for it. The difference between a well planned and a poorly planned sale can be substantial. This guide gives a plain English introduction to the main UK tax considerations when selling a business. It is general information only and not advice, so always speak to a qualified accountant or tax adviser about your own circumstances before you act.
Capital Gains Tax
When you sell a business or its shares for more than you paid, the gain you make is generally subject to Capital Gains Tax. The rate that applies depends on your personal circumstances and the reliefs available to you, which means the headline gain is rarely the amount you actually end up paying tax on.
Understanding roughly what your liability might be early on helps you plan the sale, and your retirement or next venture, around the real net figure rather than the gross sale price.
Business Asset Disposal Relief
Business Asset Disposal Relief, formerly known as Entrepreneurs' Relief, can reduce the rate of Capital Gains Tax on qualifying business disposals, up to a lifetime limit. For many owners this is one of the most valuable reliefs available when they sell.
The eligibility rules are specific and relate to how long you have owned the business and the role you have played in it. Because of that, it is well worth checking your position long before you sell rather than discovering a problem at the last minute.
Asset sale versus share sale
How a deal is structured changes the tax outcome for both sides. In a share sale you sell the company itself, while in an asset sale the company sells its trade and assets and you are left with the company shell. Buyers and sellers often prefer different structures for tax reasons.
This is frequently a key point of negotiation, and getting the structure right can be worth a significant amount. It is exactly the sort of issue where having experienced people around you pays off.
Plan early
Many of the most valuable tax reliefs depend on conditions that must be met months or even years before a sale. Bringing in an accountant or tax adviser early, ideally as part of your wider exit planning, can make a real difference to what you ultimately keep.
How agentlocal fits alongside your tax advice
agentlocal sells your business, while your accountant or tax adviser handles the tax planning, and the two work best in tandem. As part of a fully managed sale, your dedicated agent helps shape and negotiate the deal structure in coordination with your advisers, so the commercial terms and the tax position pull in the same direction.
A good place to begin is a free, confidential valuation, which gives you a realistic gross figure to take to your tax adviser as you plan the most efficient way to sell.
Key takeaways
- Gains on a sale are generally subject to Capital Gains Tax.
- Business Asset Disposal Relief can reduce the rate if you qualify.
- Asset and share sales have very different tax outcomes.
- Plan with a tax adviser early, as many reliefs depend on it.
- agentlocal works alongside your tax adviser to structure the deal well.
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