Thinking of selling up?

Make sure you do what's right for you and your business says Neil Moon, Director of Tax at Page Kirk LLP.

When you finally decide to sell a business you've built, it's a big decision – both emotionally and financially. You will have invested a lot of time and hard work over many years and you'll naturally want to get the best possible return.

Of course, it's hard to know when the exit opportunity is going to present itself, but it's prudent to think in advance about the possibility of securing available tax reliefs in order to maximise your net cash proceeds.

So what exactly should you keep in mind?

ER – Entrepreneur's Relief

This relief applies to individuals disposing of business assets including goodwill and shares in trading companies. It allows gains to be taxed at 10%, up to a lifetime limit of £10m of gains. Strict conditions must be satisfied in order to qualify for the relief, and it's therefore extremely important to take professional advice in advance of an expected sale.

SSE – Substantial Shareholding Exemption

This relief exempts from corporation tax gains on the disposal of shares in another company. Again, strict conditions must be satisfied, and early advice should be sought.

Earn-outs

If the seller receives additional consideration on the satisfaction of pre-agreed conditions for example the company performing well in the future, this is referred to as an 'earn-out'. There are capital gains tax implications of earn-outs, so it's essential that you discuss your options carefully with a tax adviser.

Another area to consider is tax-efficient share schemes that encourage your management team to stay and help with the transition – something that will make your business particularly attractive to many purchasers. It is important, however, to make careful choices over the timing of such arrangements.

It's never too early to start considering the issues involved and ask your professional advisers to help you plan your exit from the business in a tax efficient manner.

If you would like to find out more about this specific issue, speak to one of our specialists by calling 0115 955 5500 or email enquires@pagekirk.co.uk.