Plan carefully when it comes to selling your business

We are urging entrepreneurs to plan carefully for the sale of their business and not to be enticed by offers that come out of the blue.

Our team issued the warning with many business owners being tempted by unsolicited offers.

“When it comes to selling your business, it could be easy to think of the process as being just like selling any other valuable asset, such as a car or a house,” AGS Accountants and Business Advisors Director, Steve Aston said.

“However, businesses are complex entities, comprising both tangible and intangible assets. They can be sold, in whole or in part and can be divided up or restructured in innumerable ways.”

He said that, as a consequence, the tax and financial consequences of sales will depend on a wide-range of factors and achieving a financially effective sale needs careful planning.

“In particular, it is important to be aware of the rules governing Capital Gains Tax (CGT) in the UK,” he said. “Sole traders, self-employed business owners and business partnerships incur CGT on all ‘gains’ when selling or disposing of a business asset, such as land and buildings, plant and machinery, or even the business itself.”

However, he added that there are a number of CGT reliefs available to business owners, such as Entrepreneur’s Relief (ER), which can make for some significant tax savings.

“In order to qualify for ER, however, the business must be either a personal trading company or an unincorporated business meeting a number of complex qualifying conditions.”

“It is important that business owners seek tailored advice in this respect, as the sale needs to be structured in the correct way in order for ER to apply,” he said.

ER is not the only way in which business owners can benefit from substantial CGT savings when selling or disposing of a business.

“Depending on future intentions, it might be worth exploring roll-over relief, which enables sellers to defer CGT if their gains from a sale are to be reinvested in new business assets, or hold-over relief, which can defer CGT in instances where the business or asset is being transferred to a spouse or civil partner, as opposed to being sold.”

He added that, regardless of their circumstances, business owners should seek appropriate tax planning advice at an early stage to ensure that their business disposal is tax efficient.