Selling your business in the most tax efficient way

By Andrew Hague, Partner

Andrew Hague, Partner

I have just had a meeting with a client who has been approached to sell their business. They want to do this in a way that maximises the return and keeps the proceeds as tax-efficient as possible. But what’s the best way to achieve this?

The answer may well be to make use of Business Assets Disposal Relief (BADR). This was previously known as Entrepreneurs' Relief, but was renamed and reworked into BADR. If the gain you make when disposing of a business qualifies for BADR, the first £1M of your lifetime gains can be taxed at 10% instead of 20%.

That’s a substantial tax benefit if your capital gain happens to be eligible. However, some of the rules are open to interpretation and good planning will be needed to ensure your eligibility.

Understanding the BADR rules

If you can reduce the capital gains tax (CGT) due on your disposal down from 20% to 10%, that ends up saving you a considerable amount in tax, putting more money in your pocket.

But understanding the BADR rules can be tricky, especially if you don’t have the assistance of an experienced tax adviser to guide you.

Talk to us about your eligibility for BADR

If you currently own shares in a company and are thinking of disposing of the business (whether by sale or winding up), we can guide you through the process and help you avoid the pitfalls.

If your situation is complex – for example, you have significant non-trading aspects to the business – there’s real value in getting expert advice. The rules in this area change and getting it wrong can bring an expensive mistake!

Get in touch with our Tax advisory team to discuss your BADR eligibility.