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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am currently self employed. But i am about to cease trading

Resolved Question:

I am currently self employed. But i am about to cease trading and from may 27th will be doing volunteer work with my wife - so no income for either of us.
I will have earned about £7000 gross income up to may 27th (From april 6th) with around £2000 expenses. I am then selling my cleaning business for £31,000.
A £1000 deposit will be paid to me on may 27th and then 15 monthly payments of £2000 direct from the buyer.
What will i need to pay in tax? What is the most tax efficient way of handling this?
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

Any gain from sale of business would attract capital gains tax.
The fact that you are ceasing to trade and selling the business as a going concern, you would be able to claim Entrepreneurs' Relief based on information given.

This would mean that your capital gain would be taxed at 10% instead of 18%.

Based on a sales price of £31,000 your chargeaable gain would be (31,000-11,000) £20,000 and the CGT would be (20,000 x 10%) = £2,000

This would appear to be the most tax efficient way of disposing of the business.

More information on Entrepreneurs' Relief can be found here

http://www.hmrc.gov.uk/cgt/businesses/reliefs.htm#1


I hope this is helpful and answers your question.


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