The dramatic increase in the level of entrepreneurs’ relief (now a £5 million lifetime limit) whereby tax is at 10%, plus the fact that if you do not qualify for the relief you will now pay CGT at 28%, means that is has never been so important to protect your entitlement to the relief on a business sale.
Essentially you could sell your business and receive the proceeds in one of several ways:
- Cash of a fixed amount
- Cash plus the right to receive more if profit targets are met (= earn-out arrangement)
- Shares in the purchasing company
- Loan notes in the purchasing company
There may also be a combination offered from the above, but whatever may be on the table it is vital that the sale is structured from your viewpoint to get the best tax treatment as that can vary significantly. Not that tax should be the prime motivation as you should never let the tax tail wag the commercial dog.
There are several ways of ensuring that the complete package on a sale of your business qualifies you for entrepreneurs’ relief and we are ready to advise by reference to your particular circumstances.