Your Money and Your Business

5. Managing Your Exit

Shares in your business - like most other parts of your estate - may be subject to capital-gains tax (CGT) when you sell them. Start thinking about your exit from your firm in advance to make sure it is structured in the best way possible to reduce your CGT liabilities.

5.1 Capital gains up to your annual exempt amount of £10,100 are free of CGT.

• Since June 2010, higher-rate income tax payers are liable to pay CGT at 28 per cent over the annual exempt amount. For those paying the lower income tax rate, CGT is charged at 18 per cent.
• Capital losses can be off set against gains from the same year. Any excess loss can be off set against gains in future years.

5.2 Individuals can claim entrepreneurs' relief on the first £5 million of gains made on the sale of the business or its assets.

• The relief reduces the rate of CGT on gains up to £5 million.
• Claims can be made on more than one occasion up to the £5 million lifetime limit.
• Gains over the £5 million lifetime limit are charged at the usual CGT rate.

5.3 When selling a business, you may be asked to accept some of the payment in loan notes - which you may be able to use to defer payment of CGT.

• Structured correctly, you will not have to pay CGT until the notes are cashed.
• For commercial reasons, check that the loan notes are guaranteed by a bank.

5.4 Payment of CGT can be deferred.

• You may qualify for 'rollover relief' if you re-invest the funds from the sale of your business premises or assets in new business premises.
• Reinvestment relief is available if you reinvest your gain in qualifying shares in certain companies under the Enterprise Investment Scheme.
• Gains over the £1 million lifetime limit are charged at a flat rate of 18 per cent.