Capital Gains Tax reliefs for businesses

If you are in business as a self-employed sole trader or as part of a partnership, then you will be liable to pay Capital Gains Tax (CGT) if you make a profit selling all or part of a business asset. CGT is normally charged at a flat rate of 20%. However, there are various reliefs available that can reduce the amount of CGT you are required to pay.

We have listed below the main CGT tax reliefs for businesses:

Entrepreneurs’ Relief – Where this relief is available, you will pay CGT of 10% in place of the standard rate. There are a number of qualifying conditions that must be met in order to qualify for this relief.

Business Asset Rollover Relief – This is a valuable relief that allows you to defer payment of CGT on gains made when you sell or dispose of certain assets and use all or part of the proceeds to buy new assets. The relief means that the tax on the gain of the old asset is postponed. The amount of the gain is effectively rolled over into the cost of the new asset and any CGT liability is deferred until the new asset is sold.

Incorporation Relief – A capital gain will be deemed to arise if your business is converted into a company. The computation of any taxable gain will be made by reference to the market value of the business assets including goodwill. The incorporation relief means that you can delay the payment of CGT when you transfer your business in this way to a company.

Gift Hold-Over Relief – This relief can help when you give away assets or sell them for less than their full value. The relief means that any gain on the asset is ‘Held-Over’ until the recipient of the gift sells or disposes of the asset. Your gifting of the asset is not subject to CGT as the person you gave it to will pay tax when they sell it.

Planning note

It is important to remember that CGT is not payable by limited companies or unincorporated associations when they sell an asset and make a gain. Instead, the gain (less any allowable costs and reliefs) is subject to Corporation Tax.

Please call if you need to clarify the impact of any future sales that will incur a CGT charge.