Capital Gains Tax and Selling Businesses

Jan 26, 2012 by Linzi Wilson

Selling a business is one of the most important decisions that an entrepreneur will have to make. There will undoubtedly be a multitude of questions, what is it worth being top of the list. While this figure is important, what is equally important is that the net payment is maximised. To do this requires the right tax structure!

Entrepreneurs’ Relief reduces the rate of capital gains tax that is paid on the first £10,000,000 of gains from 28% to 10% – but care may be needed to ensure that the relief is not jeopardised especially when a sale is envisaged. To qualify for Entrepreneurs’ Relief the gain must be made on the shares in the company or group that you are either an employee or director of. You must have held at least 5% of the ordinary share capital and at least 5% of the voting rights for a period of at least 12 months ending with the sale.

Would you qualify for Entrepreneurs’ Relief? If not, you could, with some upfront planning!

If you are one of the following:

• An option holder
• A shareholder in a company in which there are also option holders
• A shareholder in a company with different classes of shares

Review your eligibility for Entrepreneurs’ Relief Now. Waiting until the sales process starts will be too late!

Getting professional advice can help you:

• Review your position to ensure you are eligible for Entrepreneurs’ relief in the event of a sale of your business
• Put planning in place – due to the ownership period condition, it is no longer possible to wait until the advent of a sale before capital gains tax planning is considered
• Extend the scope of the relief to family members and other individuals which could result in multiple usage of the relief
• Implement planning which will help you realise your investment with minimal tax impact

 

Contact: Linzi Wilson – Corporate Finance Manager

E: linzi.wilson@rsmtenon.com

T: 0141 226 1800

DISCLAIMER

The views and opinions expressed in the blogs are independent and do not constitute endorsed advice or necessarily reflect the views or position of Social Firms Scotland or the Acquiring Business for Good Programme