Having spent many years building a business, entrepreneurs can still look forward to a maximum tax hit of just 10% when they sell their business, as long as they have organised their business affairs so that they qualify for the CGT Entrepreneurs’ Relief.
Basically, you will need to demonstrate that you meet certain criteria for the year ending on the date you dispose of your business. For example, if you run your business through a company:
- The company must be considered to be a trading company. Exceptionally, where a company ceases to be a trading company within a period of three years before the date of disposal, the qualifying period will end on the date the company ceased to trade.
- You will need to own at least 5% of the ordinary shares that carry at least 5% of the voting rights.
- You will also need to have been an officer or employee of the company.
These conditions are just the tip of the compliance ice berg. We heartily recommend that you seek professional advice if you are thinking of selling your business or the assets used in a business. The key is to determine the “qualifying period” for your disposal and ensure that you meet any other criteria. There are different rules for businesses run as a sole trader or partnership.
The benefits in tax saved are well worth the investment.