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Financial > Tax Planning > Business Exit Strategies
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It is surprising how often business are bought rather than sold.
Many owners devote their time and energy to the daily operation of their business but have no clear idea how to bring their ownership to an end. The objectives will vary from one owner to another and thankfully, there are a wide range of strategies to provide the required solution.
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As a first step you will need to decide when you would like to withdraw from your business. This is unlikely to be an exact date as the new owners may need you to remain active within the business for a period to transfer knowledge or relationships. This hand-over period should be reflected in any decision you make about the timing of your departure.
You will need to groom your business before sale, and a good starting point is to compare its performance against the competition. If the results are not better than average today you will have time to change that before the sale begins.
A new owner could be found amongst your own workforce, your competitors, your customers or even your suppliers and the structure of the deal will vary depending upon your needs and those of the new owner. For example, it may be better for you to sell the entire business, but a transfer of all the historic responsibilities associated with your business might prove less attractive to the new owner, so the value is likely to be less than it would if you were simply selling the goodwill of your business.
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Careful consideration needs to be given to the structure of the deal if personal responsibility is to be brought to an end in a controlled manner, and an acceptable value is to be obtained after tax. The tax burden can be minimised through careful planning and in many cases avoided altogether. Please speak to Corrigans in complete confidence so that a unique approach can be devised to suit your needs.
In many cases the disposal of a business occurs in response to illness or death and so you should take out Critical Illness and ordinary Life Assurance to cover the loss to your family that would undoubtedly arise because the full market value would not be obtained for the business in those circumstances.
Every UK tax payer is allowed to make gains of £10,100 in the 2009/2010 tax year before any Capital Gains Tax is payable but there is additionally Entrepreneur's Relief which allows the first £1,000,000 of chargeable gains a discounted tax rate of just 10%. Thankfully HMR&C are happy to allow more than one disposal over many years rather than simply insisting that the lower rate can only be used once and they grant that concession in the aggregate. The tax is calculated by taking the cost price and the available allowances away from the sale proceeds after expenses. Whatever is left is divided between the number of owners of the investment and added to their taxable income. This means that most people would pay 18% tax on that balance.
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