- Your Business
- Your Money
- Tax Information
- Tax Strategies
- Interactive Tools
When embarking on a new venture, it is unlikely that you will give much consideration to how you will exit the business when the time comes. However, it is very important to plan ahead in order to maximise the personal financial gains, as well as ensuring the smooth onward transition of the business.
Creating and putting into practice appropriate strategies at each stage of your business life is crucial if you wish to obtain the maximum reward for taking the risks inherent in being in business.
Every business owner should develop a personal exit strategy.
Important issues to consider may include:
If you consider your business has a market value, or if you are looking to your business to provide you with a lump sum on sale, it is essential to start planning in advance how you will realise that value.
This is particularly important if you envisage realising the value of your business in the next 20 years.
Selling your business is a major personal decision and it is vital to plan how you will maximise the net proceeds from its sale.
You will need to consider:
Let us help you maximise the net proceeds arising from your 'ultimate sale'.
Whoever buys your business will want to be clear about the underlying profitability trends - are profits on the increase or declining?
Up-to-date management accounts and forecasts for the next 12 months and beyond will be close to the top of the list of the information which you will need to make available to prospective purchasers.
The value attributable to many businesses is driven by their historical profits, and therefore a rising trend in profitability should result in an increase in the business's value.
Profitability planning is always important, but is particularly so in the years leading up to the sale. So, what is the range of values for your business?
Although you may think you can make an educated guess, a professional valuation gives you more solid ground. Determine your position today and then work with us to establish how you can make your business more valuable.
You need to weigh up the factors which might influence the right time for you to sell your business.
You might want to take into account personal factors such as:
You will also need to consider business-related issues including:
Taxes are one of the realities of the business person's life. When you raise that final sales invoice and realise the proceeds from the sale of your business, you should be completing one of the last steps in a strategy aimed at maximising the net return by minimising the capital gains tax (CGT) on sale.
CGT basics: As a basic principle, CGT is charged on the difference between what you paid for an asset and what you receive when you sell it, less your annual CGT exemption if this has not been set against other gains. There are several other provisions, which may also need to be factored into the calculation of any CGT liability.
CGT reliefs may be very valuable: It is possible that reliefs can reduce a 28% CGT bill to zero. If you want to maximise your net proceeds it is vital that you consult with us about the timing of a sale, and the CGT reliefs and exemptions which you might be entitled to claim.
The taxable gain is measured simply by comparing net proceeds with total cost (including costs of acquisition and enhancement expenditure). The rate of tax depends on your overall income and gains position for 2012/13. Gains will be taxed at 18% to the extent that your taxable income and gains fall within the upper limit of the income tax basic rate band and 28% thereafter.
For those in business there is a special tax relief (Entrepreneurs' Relief) which may reduce the tax rate on the first £10m of qualifying lifetime gains to 10%. Generally, the relief will be available to individuals on the disposal (after at least one complete qualifying year) of:
What is certain is that all planned transactions will require careful scrutiny to ensure Entrepreneurs' Relief is maximised. Some disposals which would have qualified for the maximum business assets taper relief do not qualify for Entrepreneurs' Relief. Keep us in the picture - we are best placed to help and advise if you involve us at an early stage.
CGT is normally only chargeable where the taxpayer is resident in the UK at the time the gain arose, though the provisions of any double taxation treaty need to be checked. CGT may be avoided, provided the taxpayer leaves the UK before the disposal and remains non-resident for tax purposes for five complete tax years.
CGT and death - There is no liability to CGT on any asset appreciation at your death.
Lifetime transfer(s): For the business owner, the vital elements in the IHT regime are the reliefs on business and agricultural property (up to 100%), which continue to afford exemption on the transfer of qualifying property, or a qualifying shareholding.
Transfers on your death: Do not overlook your business when you draw up your Will. Reliefs may mean that there is little or no IHT to pay on your death, but your Will is your route to directing the value of your business to your chosen heir(s) unless the disposition of your business interest on your death is covered by your partnership or shareholders' agreement.