Selling a business is a complex process and there are many tax implications to consider – that’s why it’s always vital to seek professional help.
Our Corporate Director, Mark Bramall, says forward planning is essential to maximise the sale value and to avoid an unnecessary tax bill.
It is generally beneficial to utilise losses before the sale of the business as it can be difficult to transfer losses to a new owner – and your purchaser may also be relucant to pay for losses for which there is no guarantee of future relief.
Terminal loss relief is available for both individuals and companies, allowing the loss of the final 12 months of trading to be set against profits of the same trade made in any or all of the previous 3 tax years. The losses will be offset against the most recent tax year first.
Capital losses can only be relieved against capital gains and you could consider selling off some assets to generate gains to mop up any unrelieved losses.
Entrepreneur’s Relief is also a valuable option for anyone in business either as a sole trader, in a partnership or who has a personal company in which they own shares.
The relief may cover the disposal of all or part of a business, the assets in the business after it has stopped trading, or for the disposal of shares in a company.
It is available for qualifying gains up to a maximum lifetime limit of £10 million per person, so it could prove extremely valuable.
Anyone selling a business will face inevitable costs, and although it is not always possible to control the timing of these costs, it is easier to get tax relief for expenses before the business comes to an end.
There may be some relief available after the business ends if the costs would have been deductible had the business still been trading – but you will only be able to claim if you have the relevant receipts.
When it comes to transferring a VAT-registered business as a going concern, the new owner of the business can apply to keep the same VAT registration number.
If you are an employer, the action you need to take over your PAYE Scheme will depend on whether your buyer is taking over your payroll – it they’re not, you will need to close down your PAYE Scheme.