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bigduckontax
bigduckontax, Accountant
Category: Tax
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I am a partner in accompany which is currently being bought

Customer Question

I am a partner in accompany which is currently being bought out. We have sold our premises to the company and I will receive approx £34,000 from this. From the sale of the company I will recieve approx £30,000 this year and £40,000 in two years, I have been told I will only pay 10% entrepreneur tax on this but will chaharged much more from the sale of the buildings sale. I will continue to work for the company buying us on a freelance basis.
I am 67 years old and drawing my state pension. Thank you
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

You are generally correct in your thinking. All these moneys received will be subject to Capital Gains Tax (CGT). However it is only the gain which is taxed so some adjustment may be needed. As far as the premises are concerned the following calculation must be made to determine the gain. You need an acquisition and a disposal price and take one from the other to determine the gain which is taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. The disposal price is the net receipt from the sale, ie selling price less the costs of sale eg solicitors', estate agents' fees, advertising etc. The acquisition price is the purchase price plus purchase costs including stamp duty plus any improvements eg installation of double glazing, central heating, extensions or other capital costs but not maintenance which is allowable as an expense in your trading account.

Regarding the sale of the company shares the following restrictions apply [Gov UK web site]

'All the following must apply for at least one year before you sell your shares:

You have at least 5% of shares and voting rights in the company

You’re an employee or director of the company (or one in the same group)

The company’s main activities are in trading (rather than non-trading activities like investment'

If you clear all these hurdles then your gain will be the subject of Entrepreneurs' Relief which limits the CGT to a flat rate of 10%.

You can indeed reduce your CGT liability by investing in a private pension, but there is a limit of 40K of contributions in the current tax year.

I do hope that I have been able to shed some light on your position.

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your excellent support.

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