Inform Magazine

DEFERRAL RELIEF

Taxable profits include the money your business generates from trading and investments.

When selling your business or disposing of an asset, you usually pay CGT for the tax year in which the transaction takes place.

If you are looking to sell a limited company and wish to dispose of company assets, you may also be subject to Corporation Tax on chargeable gains. Typically, the gain is the difference between what you originally paid for the asset and what you will be selling it for.

Deferral Relief allows you to treat the gain as not arising until a future date if you decide to acquire Enterprise Investment Scheme (EIS) shares. Subsequently, the gain may be charged to CGT in a later tax year during which you dispose of the EIS shares.

INHERITANCE TAX

T AX IMPLICATIONS OF SHARES

If you have net assets of more than £325,000 when you die, your estate may be subject to Inheritance Tax (IHT) at 40% of the excess.

In some cases, you may consider accepting shares as payment for your business, allowing you to defer your CGT liability and, potentially, qualify for relief from Inheritance Tax – although shares may result in the loss of BADR. If you need any advice about the tax implications of your business sale, or more general tax guidance, K3 Tax Advisory boasts a team of skilled tax specialists who can work alongside you and offer any support you require.

The rules regarding business assets mean business owners have more to think about when it comes to IHT planning, especially if you have a mixture of business and investment assets. In some cases, mixing assets can mean the whole value is protected from IHT, whilst in others it can mean the whole value is subject to IHT. Careful planning can therefore have a significant impact.

It is also likely your retirement plans or plans to sell the business will have a significant impact on your IHT position.

Whether it is a full or partial business sale you wish to pursue, there are tax liabilities to weigh up and identifying your goals will provide you with a structured approach. However, as mentioned above, there are also ways to mitigate those liabilities, in the form of relief schemes: Business Asset Disposal Relief (BADR) Initially introduced as Entrepreneurs’ Relief until the title was changed in 2020, BADR allows you to reduce the tax on gains when selling your business. If eligible, BADR can reduce the rate of CGT to 10% when disposing of your business or assets. The scheme allows you to claim relief for up to £1million in your lifetime and you are required to have owned your company for over two years as a sole trader or as a business partner.

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