The Lemon Fool

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

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

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.

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

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

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.

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

John

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?