16. Business Asset Disposal Relief – Claim a Reduced Rate of Tax on Selling Your Business
Business Asset Disposal Relief (BADR) can reduce the Capital Gains Tax (CGT) payable by company shareholders on the disposal of their shares. It also applies to the sale of sole trades or partnership shares. A thorough review ensures both the business and individual qualify for the relief, maximising planning opportunities.
17. Preparing a Business for Sale – Optimising the Tax Position and Sale Proceeds
Before selling a business, we can help owners take steps to achieve the most tax-efficient sale, maximising returns. This may include extracting assets to retain, restructuring the business to optimise sale proceeds, and ensuring no tax issues that could prompt a buyer to negotiate a price reduction.
A Family Buy-Out allows family shareholders to sell the business to their children at market value, enabling parents to cash in their shares while ensuring the business is passed to the next generation.
19. MBO (Management Buyout) or MBI (Management Buy-In)
Business owners looking to cash in on their shares may consider a Management Buyout (MBO), selling to management rather than a third party. This can be more tax-efficient, using BADR rather than paying higher taxes on future earnings. A Management Buy-In (MBI) involves new management buying into the business for similar reasons.
20. Sell Shares Back to the Company via a Company Purchase of Own Shares (CPOS)
If a shareholder wishes to sell their shares but remaining shareholders lack the funds, the company can buy back the shares through a CPOS. Subject to conditions, a CPOS can be treated as a capital receipt, subject to CGT at a 10% rate using BADR. This allows tax-efficient exit strategies for shareholders wishing to retire or due to disagreements.
21. Leave Cash in the Business in Advance of a Sale
Prior to a sale, minimising cash extraction can build a larger cash balance, potentially increasing the sale price. The tax paid on increased sales proceeds may be less than on dividends or salary. Careful planning ensures valuable reliefs like BADR are preserved.
22. Consider Selling a Subsidiary Tax-Free and Reinvesting the Proceeds
Using the Substantial Shareholding Exemption, a group of companies can sometimes sell a subsidiary without tax charges on the gain. The tax-free proceeds can then be reinvested in other activities.
23. Sell Tax-Free to an Employee Ownership Trust (EOT)
Alternatively to an MBO, MBI, or CPOS, shareholders might sell their shares to an Employee Ownership Trust (EOT). Selling over 50% of the company to an EOT can be CGT-free. An EOT benefits all employees, allowing the company to award tax-free bonuses of up to £3,600 per annum.
24. Optimise the Tax Position in Companies to Be Acquired
When acquiring a company, we conduct due diligence to identify inherent tax risks and advise on optimising the tax position when integrating the new company into your existing business.
25. Incentivise Staff to Optimise the Sale Price
Retaining and incentivising key employees can maximise business performance and align their interests with shareholders, optimising the eventual sale price. This can be achieved through share options and other incentives before a sale.
26. Should I Buy/Sell the Company or the Trade and Assets?
When buying or selling a business, consider whether to transact in company shares or just the trade and assets. Share transactions transfer all assets and liabilities, while asset sales allow selective acquisition. Seek advice on the best route and understand the pros and cons of each option.
27. Reduce Tax Liabilities on Sale by Tax Efficient Reinvestment
Tax liabilities from selling company shares can sometimes be reduced by reinvesting proceeds into qualifying investments like Enterprise Investment Scheme (EIS) shares.
28. Succession Planning for Family Businesses
Family businesses risk unsustainability without a succession strategy. Options include passing the business to family members, the management team, a third party, or an EOT. We assist business owners in exploring the best options for their family and business.
29. Tax Efficient Use of Sale Proceeds
Shareholders receiving proceeds from a business sale should consider Inheritance Tax (IHT) exposure and strategies for passing proceeds to family members, trusts, or investing in pensions and other investments. A comprehensive estate planning and wealth management review is recommended for future retirement planning.