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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am a partner in a business (children's nursery 50% each)

Resolved Question:

I am a partner in a business (children's nursery 50% each) We started in 2005. I am looking to retire and so is my business partner - so we are looking to sell the business. There is a chance my business partner would 'buy' me out. We have not spoken to our accountant or solicitor yet but I was just looking for some advice with regards ***** ***** tax would need to be paid.
I am also looking for advice as to whether it would be better for me to sell to her or to sell the business as a whole - of course I would like to make as much from the sale either way
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Is the business run as a partnership or through a limited company? How long has it been in existence for?
Customer: replied 2 years ago.

We are not a limited company (but were planning to go limited in 2015) so we are a private business both with equal shares. Our business account opened in July 2004 and we opened the setting in January 2005. many thanks

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 2 years ago.
Hi again.

If the two of you sold the business to somebody else, you may qualify for entrepreneurs' relief which you can read about in HS275 here. If you did qualify, then your Capital Gains Tax rate charged on the gain you make through selling the business goodwill and any other assets used in the business (the premises for example) would be limited to 10% after deduction of the annual CGT exemption of £11,000 which you would each be entitled to. The regular CGT rates are 18% and 28%. The rate or combination of rates that you pay are dependent on the sum of your income and the taxable gain in the tax year you make any gains. ER would limit your CGT to 10%.

I really cannot tell you whether it would be better to sell your share of the business to your partner or to sell the business as a whole. Either way, you will get half the value of the business. You would need to discuss the possibilities with your accountant. It may be that your partner or any third party buyer would want to pay in instalments which may or may not suit you. A third party buyer may not offer the same for the business as your partner or may want one or both of you to continue as employees.

I hope this helps but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15839
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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