SME Adviser Series: Considering the tax implications of a business sale

For an SME owner manager, planning for the sale of your business or for your own retirement is something that should always be front of mind, however not all business owners know where to start.

Seeking advice from a specialist who understands the tax implications of a business sale can provide you with a strong advantage when structuring the sale agreement of your business. There are complicated tax laws relating to the buying and selling of a business, but with skillful planning it is possible to minimise or defer some of these taxes.

Here are 5 key points when considering the tax implications of a business sale:

1. Plan ahead. A buyer will go through your business history with a fine toothcomb. Do this yourself and address any possible issues in advance.

2. Ensure Capital Gains Tax (CGT) Entrepreneurs’ Relief is available on a sale. The rules are straightforward, but there are tripwires. Getting this right could mean the difference between paying tax at 20 per cent or 10 per cent.

3. Clean up the balance sheet. Are there assets a purchaser will not want or that you would like to keep? Extract these in a planned fashion, rather than a last minute panic.

4. Make sure all your tax returns (including PAYE and VAT) are up to date. The same goes for Companies House. If there are any outstanding disputes, tax enquiries, etc. try to settle them even if it might cost a bit more. A buyer does not want to purchase problems. If this is not possible, consider how problems might be ring-fenced.

5. Appoint a good team of professional advisers experienced in business sales. They will have come across most situations before and can save you money by negotiating on the structuring of the sale price, especially if there is deferred consideration or an earn out, and minimise your risk of warranty claims following a sale.

For more information about how Beavis Morgan can assist you with planning for sale or retirement, contact your usual Beavis Morgan Partner or email