ACTIVE PRACTICE UPDATES                                                                   AUGUST 2012Exiting your business...
Exiting your businessWhen should you sell?                       Minimising Capital                         Eliminate CGT ...
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Active Business Series - Exiting Your Business Aug 2012


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Active Business Series - Exiting Your Business Aug 2012

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Active Business Series - Exiting Your Business Aug 2012

  1. 1. ACTIVE PRACTICE UPDATES AUGUST 2012Exiting your businessEvery business owner should have an exit strategy in place, and asmore and more owners and directors approach retirement, is nowthe time to look at your exit strategy?Your personal exit Business UPDATEstrategyEvery business owner should have a the increase or decrease? What is the • Is yours a service business withpersonal exit strategy. We sometimes effect of recent economic conditions limited ixed assets, or are stockrefer to this as ‘starting with the end in on the proitability and value of your and equipment a large part of yourmind’. business? Up-to-date management company’s value? accounts and forecasts for the next • To what extent does your businessKey issues to consider could include: 12 months will be close to the top depend on the health of other• Passing on your business to your of the list of the information that you industries or the economy? should be prepared to make available children or other family members, or • What is the outlook for your line of a family trust to prospective buyers. The value business as a whole? attributable to many businesses is driven• Selling your share in the business to by the historical proits and therefore a • Will your company’s products and your co-owners or partners rising trend in proitability should result processes be outmoded in the near• Selling your business to some or all in an increase in the business’ value. future? of the workforce • Does your company use up-to-• Selling the business to a third party For more information about how we can date technology and have a• Public lotation or sale to a public help you plan for the future, call us. well-developed research and company development programme?• Winding up • How competitive is the market for• Minimising your tax liability Maximising proitability your company’s goods or services? • Does your company have to• What you will do when you no Proitability planning is always important contend with extensive regulation? longer own the business but particularly in the years leading up to the sale. So, what is the value of • Are your company’s products and• Whether the new owners will need services diversiied? or desire your involvement after the your business? Although you may think sale. you can make an educated guess, a • What are your competitors doing professional valuation gives you more that you should be doing, or could solid ground. Assess your position today do better?Maximising the value of and then work with us to see how you • How strong is the company’s staff can make your business more valuable.your business These are the sorts of questions a that would remain after your sale? • Do you plan to make yourselfWhoever buys your business will potential purchaser might ask himself: available to the new owners? Onwant to be clear about the underlying • Are sales lat, growing only at the what terms?proitability trends - are the proits on rate of inlation, or exceeding it?18 Hyde Gardens BN21 4PT01323 431 200
  2. 2. Exiting your businessWhen should you sell? Minimising Capital Eliminate CGT altogether?You need to weigh up the factors Gains Tax CGT is only chargeable where the taxpayer is resident in the UK at thewhich might inluence the right time foryou to sell your business. Taxes are one of the necessary realities time the gain arose, so becoming of a business owner’s life. When you non- resident before the disposal canPersonal factors raise that inal sales invoice and take eliminate the charge, provided the the proceeds from the sale of your taxpayer remains non-resident for taxThere are many personal factors that business, you should be completing purposes for ive complete tax years.are likely to inluence your decision as one of the last steps in a strategy Furthermore there is no liability toto when to sell your business. You may aimed at maximising the net return by CGT on any asset appreciation atneed to think about: minimising the capital gains tax (CGT) your death. However, it is becoming• When do you want to retire? on the sale. increasingly dificult to establish non residence and HMRC is likely• Has your health begun to to challenge any attempt to do deteriorate? Capital Gains Tax basics so artiicially – through the courts• Do you still relish the challenges of if necessary. To beneit from this running your business? CGT reliefs may be very valuable exemption, it is therefore likely that you• Does your business have an heir Entrepreneurs’ relief applies to the would have to leave the UK for good, apparent? cutting all ties in favour of a new sale of a business and can reduce• What do you wish to do with your place of residence. Remember that the the rate of tax paid from 18 per cent capital? country you move to may also charge or 28 per cent to 10 per cent. It is a form of CGT on disposals.• Will your income stream and essential if you want to maximise your wealth be adequate, post sale? net proceeds that you consult with us• Will the business want your about the timing of a sale, and the CGT reliefs and exemptions which services after you retire? you might be entitled to claim. The Here is where we can maximum tax reduction is currentlyBusiness factors £1,800,000 which is 18 per cent of advise:External factors can also be important the £10 million exemption. • Identifying successors in the familyin timing your sale. If you can time • Minimising the tax on gift or saleyour business sale to coincide with Holdover relief of the businessa period of economic growth, when • Identifying successors within thebuyers outnumber sellers and will pay This relief generally applies to gifts businesspremium prices, you will most likely of business assets and will normally reduce the tax payable to zero. It • Identifying possible purchaserssecure the best price. works by treating the donor’s gain • Valuing your businessThe following questions may assist in as if it were attached to the asset - • Grooming the business for saleassessing the climate for selling your effectively passing on the donor’s gain • Preparing the business for successbusiness: to be added to any gain realised later without you• How has the recent adverse by the recipient of the gift. Holdover relief must be speciically claimed by • Timing the sale economic environment impacted your business? both the donor and the recipient of the • Maximising the sale price asset. If you are passing your business • Minimising the tax on a sale• What is the effect of the current on to a member of your family, this state of the stock market? relief may be relevant to you. If you • Planning your transition to your• To what extent is your business are paid the full value of the business, next business ‘trendy’ or at the leading edge? holdover relief will not be available to • Providing succession options• Is your business forecasting you. through your partnership or increases to the top and bottom shareholders’ agreement lines? Rollover relief • Providing for a smooth transfer• Is your business doing better than of your business interests at your This relief applies to the replacement other similar businesses? of business assets, and is intended death or if you become disabled• Is your business at, or near, its full to allow the seller to reinvest all of potential? the proceeds of the disposal in a replacement asset, which he would As your taxation advisers we aim to keep not be able to do if he had to pay a you up-to-date, but personal advice should tax liability. It normally operates by always be sought before taking any action reducing the cost of any new asset by – we would be delighted to advise you on any taxation matter. some or all of the gain realised on the disposal of the old asset.