Tax implications of business sale process
The sale of your business will unsurprisingly have various tax implications. If you are a limited company it is likely that you will liable for Corporation Tax following the sale of your business. This is charged on the profit you make from selling. Should you be a sole trader or operate a business partnership, you will instead be liable for Capital Gains Tax (CGT) upon the sale. If you are eligible, Entrepreneurs’ Relief can help to reduce the rate of CGT you need to pay.
Depending on the structure of your business, i.e. if you are a sole trader, the sale may affect your personal income tax position. If the business is sold as a going concern then you should not need to pay any VAT on the disposal.
Exactly how your tax situation will be affected will depend on various factors such as how much you make from the sale, whether you are eligible for certain tax relief schemes, and the structure of your business. This can be an extremely complex area; therefore you should always seek professional advice regarding your tax position prior to putting your business up for sale. Planning ahead may also end up saving you a substantial amount on your tax bill.