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bigduckontax, Accountant
Category: Tax
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My client started a business 10 years ago and has now sold

Customer Question

My client started a business 10 years ago and has now sold it for 45k what if any are the capital gains implications
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.
Glib answer, as long as the proverbial piece of string! Doesn't get us vary far though.
First what did he pay for the business in the first place; answer nothing as he started it from scratch. Thus the whole 45K less selling costs if any like adverts etc, is liable to Capital Gains Tax (CGT). However, your client has an Annual Exempt Amount of 11K so the gain is reduced to 34K. Your client will almost certainly be entitled to Entrepreneurs' Relief which limits CGT to a rate of 10% instead of the normal 18 or 28%. On this scenario worst case position is a CGT tax bill of GBP 3400.
Here is Ellacotts [Chartered Accountants and Business Advisers] advice on the subject:
'What CGT benefits do business assets receive?
The so-called ‘entrepreneur’s relief’ was introduced for people selling business assets. The relief, which reduces the effective rate of capital gains tax to 10%, has recently been increased for lifetime gains to £10 million. On gains of £10 million this represents a maximum tax saving of £1,800,000!'
A bit above your clients gain, but useful information to tuck away.
I do hope I have helped you with your question.