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:
1. When you sell the business it must be considered to be a trading company. To the extent that your business owns investments it will not qualify for the relief. 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.
2. If you are selling shares in your personal company you will need to own at least 5% of the ordinary shares that carry voting rights.
3. During the qualifying period 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.
The benefits in tax saved are well worth the investment.