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 a possible exit from your firm several years ahead to make sure it is structured in the best way possible to reduce your CGT liabilities. (See Planning your exit from your business.)

5.1 Make sure shares qualify as business assets for business asset taper relief on CGT.

• This cuts CGT liabilities to a rate of ten per cent for a 40 per cent taxpayer for business assets held for two years or more.
• You may lose this relief if a substantial part of the company's activities are non-trading activities. Turnover, expenditure, directors' and employees' time, investments and cash balances can all be used to determine this. A good adviser will help you to make sure assets qualify.
• Where possible, make sure any capital losses are set off against gains on non-business assets.

5.2 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.