Capital Gains Tax for business

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Capital Gains Tax for business

What you pay it on

You may have to pay Capital Gains Tax if you make a profit (‘gain’) when you sell (or ‘dispose of’) all or part of a business asset.

Business assets you may need to pay tax on include:

  • land and buildings
  • fixtures and fittings
  • plant and machinery, eg a digger
  • shares
  • registered trademarks
  • your business’s reputation

You’ll need to work out your gain to find out whether you need to pay tax.

You pay Capital Gains Tax if you’re a self-employed sole trader or in a business partnership. Other organisations like limited companies pay Corporation Tax on profits from selling their assets.

When you don’t pay it

You don’t usually need to pay tax on gifts to your husband, wife, civil partner or a charity.

Work out your gain

Your gain is usually the difference between what you paid for your business asset and what you sold it for.

Use the market value instead if:

If the asset was given to you and you claimed Gift Hold-Over Relief, use the amount it was originally bought for to work out your gain. If you paid less than it was worth, use the amount you paid for it.

Deduct costs

You can deduct certain costs of buying, selling or improving your asset from your gain.

Costs you can deduct include:

  • fees, eg for valuing or advertising assets
  • costs to improve assets (but not normal repairs)
  • Stamp Duty Land Tax and VAT (unless you can reclaim the VAT)

You can’t deduct certain costs. These include:

Contact HM Revenue and Customs (HMRC) if you’re not sure whether you can deduct a certain cost.

Apply reliefs

You may be able to reduce or delay paying tax on your gains if you’re eligible for tax relief.

Work out if you need to pay

When you know your gain you need to work out if you need to report and pay Capital Gains Tax.

If you’re in a business partnership:

  • work out your share of each gain or loss
  • the nominated partner must fill in form SA803

You can get help with working out your tax, eg from an accountant.

Reporting a loss

The rules are different if you need to report a loss.

Tax relief

You may be able to reduce or delay the amount of Capital Gains Tax you have to pay if you’re eligible for tax relief.

Relief Description Eligibility
Entrepreneurs’ Relief Pay 10% Capital Gains Tax on qualifying profits if you sell all or part of your business (instead of the normal rate of 18% or 28%) For sole traders, business partners or those with shares in a ‘personal company’
Business Asset Rollover Relief Delay paying Capital Gains Tax when you sell or dispose of some types of asset if you replace them Buy the new asset within 3 years of disposing of the old one. Use the old and new assets in your business
Incorporation Relief Delay paying Capital Gains Tax when you transfer your business to a company Transfer all your business and its assets (except cash) in return for shares in the company
Gift Hold-Over Relief Pay no Capital Gains Tax if you give away a business asset - the person you gave it to pays tax when they sell it You used the business asset for trading as a sole trader or partner

Tax relief when you sell your home

You normally get Private Residence Relief when you sell or dispose of your main home, meaning you don’t pay any Capital Gains Tax.

If you’ve used any part of your home just for business, you have to pay Capital Gains Tax on that part when you sell your home.

Disincorporation relief

You may be able to claim Disincorporation Relief if you become a partnership or sole trader having been a limited company.

If you acquire the company’s assets when it changes its business structure, you may have to pay Capital Gains Tax if you sell or dispose of them later - you’ll use their value, including any Disincorporation Relief, when you acquired them.

You can get help from an accountant or tax adviser.

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