Video 12 – How Can I Minimise The Tax I Pay When Selling My Business?

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Speaker 1:

Wonderful topic of tax because in this country we have to pay tax. So how can you mitigate the tax that you pay on a transaction that’s legal?

Speaker 2:

Well of course that’s recently got a little but more interesting with announcements in the budget. So for those that aren’t up to speed, the lifetime allowance for entrepreneur’s relief, which is the discounted tax rate of which benefits from selling a business can be realized, has gone down from 10 million pounds lifetime allowance per person to just one million pounds in the recent budget. And that took effect on the 11th of March.

Speaker 2:

In terms of mitigating tax, you should always seek advice from a tax specialist and no matter how much experience the team here at Evolution have, we would never stand in those shoes and we’d recommend that that’s an imperative part of the transaction for any seller. There are a number of aspects that need to be considered, including how you treat surplus cash in the transaction, how you maximize your allowance between shareholders and how the deal is structured, particularly within the share purchase agreement and how that’s drawn up. All of which your tax advisor will have a role to play.

Speaker 1:

Steve?

Steve:

Yeah. I mean there are fundamental things that need to be got right to make sure that the client doesn’t prejudice their position with HMRC in terms of what they’re doing. I mean the discretionary rates, even now, they’ve been revived in terms of the reduced lifetime allowance for the seat, the cap of the game, the benefit you get under entrepreneur’s relief. Those tax rates are still better than the tax or lower than the tax rates our clients would pay either in dividend tax that they would pay or on earnings if they were taking cash from the business.

Steve:

But I smile as we talk about it. We have to do it right. But my honest answer to the question would be you can’t. Death and taxes are the two certainties that you have and there are rules to abide by and things to get right, but fundamentally you are going to pay your tax.

Speaker 2:

It’s worth making sure that you also seek the advice of a wealth management advisor within the process. So often within our master classes, we’ll bring a wealth management advisor to the table. [inaudible 00:02:21] Charles have been involved with us for a few of the master classes recently. And seeking advice from someone like that to maximize things like pensions are often a good way of removing cash from the business in an optimal way before the transaction takes place. Is also, as I say, if you’re going to seek the advice of a tax advisor with the recent change, there may well be some wiggle room in the legislation, but it needs to be explored for transactions that are already in flight.

Speaker 1:

And tax is probably the one thing years and advanced you need to get advice on before you ever sell a business. Whether you want to live in another country. I can think of a few, but I won’t mention them. Fear of falling into the advice trap. But certainly years in advance, not only the company tax position, but your personal tax position as well. Time well spent.

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Alternatively, If you would like to discuss a potential business sale with one of our Client Directors, please either call Amanda on 0118 959 8224, email agale@evolutioncbs.co.uk or Make An Online Enquiry.

© 2020 Evolution Complete Business Sales Ltd.

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