The UK Rules
CGT for Business

Capital Gains Tax for Small Business

Capital Gains Tax may be liable any time you produce a profit (also called a gain). You can realise a gain by selling or disposing of an asset as part of a business.

CGT FOR BUSINESS: The type of business assets which may be liable for tax can be intellectual (e.g. a website) or physical (e.g. a shop).

Capital Gains Tax on Business Property

You must be able to work out your profit (gain) to determine whether you need to pay - or not.

Capital Gains Tax for business owners may be due if you are part of a business partnership or self-employed sole trader.

Limited companies and some other organisations are responsible for paying Corporation Tax on profits made from selling their company trading assets.

Capital Gains Tax for business owners may include any profit made by selling:

Note: As a rule, gifts to a spouse, civil partner, or a charity do not usually incur business Capital Gains Tax.

Working Out the Gain

The gain is the positive difference between the purchase of the assets and the amount received by selling it. You should use the current market value for circumstances when you:

Use the original purchase price if you claimed Gift Hold-Over Relief. But, use the purchase price if you purchased the item for less than it is actually worth.

Costs Which May be Deducted

Certain costs may get deducted from the 'gain' when purchasing, selling, or making improvements to a business asset. The costs which you may deduct include:

Costs Which May Not be Deducted

Typical costs which are not deductible include:

Note: Contact HM Revenue and Customs (HMRC) if you need further help or advice about deducting costs from a gain.

Reduce or Delay Paying Tax

Some reliefs apply to Capital Gains Tax for business. Thus, you can reduce or delay the payments providing you are eligible for tax relief.

Working Out if You Need to Pay

Once you have determined the gain, you can then work out if you need to report and pay Capital Gains Tax.

Being in a business partnership means working out the value of the share for each gain or loss. The nominated business partner should complete form SA803. An accountant or a tax adviser can help you to work out your business tax responsibilities.

How to Report a Loss

Note: If you plan on reporting a tax loss you will need to use a different set of rules.

Business Capital Gains Tax Reliefs

As a business owner, it may be possible to reduce or delay the amount of Capital Gains Tax to pay. But, you must qualify for tax reliefs in the United Kingdom.

Type of Relief A Description Eligibility Criteria
Entrepreneurs' Relief. Pay 10% Capital Gains Tax on qualifying profits if you sell all or part of your business (instead of the normal rates). 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.

CGT and Private Residence Relief

As a rule, you would get Private Residence Relief if you sell your main dwelling. In this case, it would not usually be liable for Capital Gains Tax. Even so, using a part of the home 'solely' for trade or business purposes means Capital Gains Tax may be due on that section of the building if you sell the property.

Note: A different section has further information and clarification on tax when you sell your home.

Capital Gains Tax Disincorporation Relief

If the business was once a limited company, but has since become a partnership or sole trader, you should be able to claim Disincorporation Relief. But, always consider getting professional help from an accountant or tax adviser.

Capital Gains Tax for Business Owners in the United Kingdom