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Taxation on selling a business

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redsturgeon
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Taxation on selling a business

#268292

Postby redsturgeon » November 30th, 2019, 5:02 pm

If I set up a business from zero and then decide to sell it some years later, how is the money from the sale treated for taxation purposes?

TIA

John

Laughton
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Re: Taxation on selling a business

#268299

Postby Laughton » November 30th, 2019, 6:11 pm

I'm going through this process at the moment. In my case it was limited company whch I liquidated as it has no value to a purchaser without me remaining.

You "should" be entitled to Entrepreneurs Relief which effectively means that you pay Capital Gains tax at 10%. To qualify you need to be the controlling owner and not undertake a "similar" business for a minimum of 2 years after the sale:

https://www.gov.uk/entrepreneurs-relief

supremetwo
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Re: Taxation on selling a business

#268300

Postby supremetwo » November 30th, 2019, 6:13 pm

Capital gains tax with entrepreneurs relief.

https://www.gov.uk/capital-gains-tax-businesses
https://www.gov.uk/entrepreneurs-relief
If you’re selling all or part of your business
To qualify for relief, both of the following must apply:

you’re a sole trader or business partner
you’ve owned the business for at least 2 years before the date you sell it
The same conditions apply if you’re closing your business instead. You must also dispose of your business assets within 3 years to qualify for relief.

PinkDalek
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Re: Taxation on selling a business

#268312

Postby PinkDalek » November 30th, 2019, 7:39 pm

redsturgeon wrote:If I set up a business from zero and then decide to sell it some years later, how is the money from the sale treated for taxation purposes?


That wording suggests to me you are asking about a sole trader or partnership. Can you clarify and is this something that hasn't even been started as yet?

The replies so far are on the basis of "you" being a limited company. On that front be aware that Entrepreneurs' Relief has been attacked in recent times and there has been talk of scrapping it/replacing it. Here's a one minute read from Pinsent Masons on the subject:

Scrapping entrepreneurs' relief 'would be short-sighted'
Out-Law News | 11 Nov 2019
https://www.pinsentmasons.com/out-law/news/scrapping-entrepreneurs-relief-would-be-short-sighted

johnhemming
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Re: Taxation on selling a business

#268313

Postby johnhemming » November 30th, 2019, 7:43 pm

Entrepreneur's relief applies to sole traders and partnerships as well as Ltd Companies.

PinkDalek
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Re: Taxation on selling a business

#268317

Postby PinkDalek » November 30th, 2019, 8:05 pm

johnhemming wrote:Entrepreneur's relief applies to sole traders and partnerships as well as Ltd Companies.


Good point and thanks for the correction, as per the first page here https://www.gov.uk/entrepreneurs-relief!

I still think a little bit of background would assist.

redsturgeon
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Re: Taxation on selling a business

#268323

Postby redsturgeon » November 30th, 2019, 8:43 pm

Yes a ltd close company with two directors each with 50% shares.

John

stewamax
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Re: Taxation on selling a business

#269828

Postby stewamax » December 7th, 2019, 1:55 pm

Not my area, but...
Do the two directors have service contracts with PAYE and NI paid? If so, they would each be entitled to £30K salary tax-free if the service contracts were severed before dissolution. Or does HMRC already block this loophole if the recipients are directors and the company is a close one?


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