Selling Your Business?
Rob Maddison-Joss
Principle | Hillcrest Wealth Management, Partner Practice of St James's Place Wealth
It is never too early to prepare for the sale of your business. Advanced preparation can put you in the driving seat.
Putting plans in place early on can also enable a sale to be organised at short notice should an appropriate buyer make an approach, or to deal with the consequences of an unexpected death or incapacity.
Entrepreneurs’ Relief
Capital Gains Tax (CGT) is normally charged on the value gain of assets on gift or sale, at a maximum rate of 28%. However, Entrepreneurs’ Relief (ER) can reduce CGT liability to 10%.
There is no limit on the number of times ER can be claimed, but it (currently) has a lifetime cap of ￡10m.
To claim ER, the business must be a trading company or the holding company of a trading group, and for the 1 year prior to sale, the owner(s) must:
- hold at least 5% of ordinary shares (or be a partner);
- hold at least 5% of the voting rights; and
- be an officer or employee.
Estate planning
Estate planning is crucial to ensure assets suffer the least possible tax during your lifetime and after your death.
So think about making gifts into family trusts during your lifetime and/or on your death.
Also consider passing all or part of your business wealth (but not necessarily control) to family in advance of any sale; it can often be more tax-efficient to give away shares beforehand - rather than cash afterwards.
You should also have a Will in place that deals effectively with any business assets.
The tax savings arising from a well-planned business exit can be dramatic, and business owners are well advised to take specialist tax advice on how to structure their business as early as possible.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
The writing of a Will necessitates the referral to a service that is separate and distinct to those offered by St. James's Place. Wills are not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.
Rob Maddison-Joss 07834 815739