SELLING your business can be a big deal and it’s normally never a decision business owners take lightly.
If you are in this position, where you and your business are parting ways, you will need a good exit strategy in terms of valuations, who’s going to buy it, what are the terms of the sale, completing all of the required financial and legal paperwork, informing HMRC and, of course, paying taxes.
Our advisers have been helping clients through this process for years, working with solicitors and accountants in the process.
You will recognise the need here for how crucial an independent financial adviser is in this situation.
Selling Your Business
Here are some things to consider.
If you are going to realise a substantial profit on selling your business or shares you may want to consider becoming non-resident and avoid the capital gains (CGT) altogether.
Strict rules mean that careful planning is required but, briefly, it is necessary to remain overseas for a period of at least five tax years, coming back to the UK for an average of less than 90 days per tax year. The use of appropriate tax treaties can reduce this period of absence to little over a year. You will need to check that you do not become liable to tax on the gain in your new country of residence.
If there is no potential purchaser on the horizon, you can always get the company to buy the shares from you. In certain circumstances, this is treated as a dividend, giving you a tax credit against your income tax liability.
This can be more advantageous than making a capital gain, when Capital Gains Tax at 40 per cent would be payable (although you may have taper relief available).
It is possible to reduce the gain arising on the disposal of shares by paying a pre-sale dividend. This is tax-free in the hands of the selling company. In the hands of an individual, the effective rate of tax is 25 per cent.
If you do sell or simply want a tax efficient investment consider A Venture Capital Trust (VCT).
A Venture Capital Trust is like a large portfolio of EIS qualifying companies, but with different tax breaks. For an investment of up to 200,000 in any one tax-year, investors receive:
- • An income tax reduction in the tax year of investment of 30 per cent of the investment provided the shares are held for at least five years.
- • Exemption from tax on any capital gains made on the Venture Capital Trust investment itself.
- • Tax free dividends that include both income derived from the underlying investments, and from capital gains realised inside the Venture Capital Trust portfolio.
- • In addition to the tax rebate, the key benefits of a Venture Capital Trust are its investment in a portfolio of companies, which reduces risk and the income stream from tax-free dividends that also include realised capital gains.
If you are considering selling your business, get in touch with our team. We have extensive experience in this field. We will help you get the best deal for you.
Our advisers are here to help you so please do get in touch. To contact our Northern Ireland office, call 028 6863 2692; our Cornwall office – 01872 222422 and you can reach our Southampton office on 023 8064 9674. If you prefer to email, please contact us on info@wwfp.net.
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