Selling your business

There are some special capital gains tax reliefs available for businesses and each of these has detailed rules. Failure to comply with the rules means that you will miss out on the relief. The major reliefs for business are:

• Rollover relief – this relief permits you to replace one business asset with another business asset and carry forward or ‘rollover’ the gain on the sale. E.g. Harold sells the hotel he runs. He makes a capital gain on the sale. He buys another hotel business. If he complies with certain conditions, he can choose not to pay any capital gains tax now but instead to ‘rollover’ the gain so that capital gains tax would only be payable if he sold (or disposed of in any other way) the replacement hotel

• Entrepreneurs’ relief – this relief allows business owners to pay less capital gains tax when they sell all or part of a business. There are detailed conditions. From 6 April 2011, gains up to a maximum of £10m are covered and the rate of tax is 10%. This limit covers all the sales a business owner makes in his or her lifetime. The relief is available from 2008/09, but the overall limits and calculations have changed.

• Incorporation relief – This relief allows a sole-trader or partnership to transfer their business into a limited company without suffering an immediate capital gains tax bill. Instead the gain is normally deferred until shares in the company are sold

• Gift hold-over relief – this relief enables a business owner to give away business assets (e.g. a building used in a business) without there being an immediate capital gains tax bill. Instead, capital gains tax would only be due when the recipient of the gift sells or otherwise disposes of the assets. E.g. You could give the workshop you use for business to your children. If you claim the relief, there would be no immediate capital gains tax bill, but tax could be payable if the children sold the workshop

If you sell your business you will normally need to take professional advice as the tax consequences can be complex.

There is some detailed guidance on the rules for capital gains tax relief for businesses on the HMRC website here.