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CGT for Business

Capital Gains Tax for Business

Capital Gains Tax may be required any time you produce a profit (also called 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 or not you need to pay.

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

CGT 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.

Note: As a rule gifts to your spouse, civil partner or charity do not usually incur business capital gains tax.

Working Out the Gain

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

Use the original purchase price if you have claimed Gift Hold-Over Relief and use your purchase price if you purchased the item for less than it is really worth.

Costs Which May be Deducted

Certain costs may be deducted from your 'gain' when you are purchasing, selling, or making improvements to a business asset. The costs which may be deducted include;

Costs Which May Not be Deducted

Typical costs which are not deductible includes interest on a loan used to purchase your asset and the usual costs which you claim as a normal business expense.

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

Reduce or Delay Paying Tax

Some relief applies to the Capital Gains Tax for business owners which means you can reduce or delay the payments providing you are eligible for tax relief.

Working Out if you need to Pay

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

Those who are involved in a business partnership should work out the value of the share for each gain or loss and the nominated business partner should complete form SA803. An accountant or tax adviser can help you to work out your business tax responsibilities.

How to Report a Loss

If you intend to report a loss then you need to use a set of different rules.

Business Capital Gains Tax Rate

As a business owner, it may be possible to reduce or delay the amount of Capital Gains Tax that you are liable for, providing you are eligible for tax relief in the United Kingdom.

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 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 are entitled for Private Residence Relief if you sell your main dwelling which means you would not normally be liable for Capital Gains Tax. Nevertheless, using a part of your 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.

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, as a rule, but always consider getting professional help from an accountant or tax adviser.

Capital Gains Tax for Business Owners; UK Rules Updated 2017