Selling your company is frequently the climax of your business effort. When the time comes to move on or retire, you want to extract as much value as possible from your business. It is a significant choice and a difficult process, with several tax and legal consequences to consider.
When you sell your firm, you have legal obligations to the employees you employ. You must also complete your company’s tax returns. It is important to inform your employees about when and why you are selling your business as well as about any redundancy or relocation packages.
Get an understanding of what laid-off employees are entitled to.
Notifying HMRC about selling business.
- You can either use the online form to tell HM Revenue and Customs (HMRC) about you selling your business. It covers both Self-Assessment and National Insurance
- By calling HMRC to cancel your class 2 National Insurance contributions.
When selling a VAT-registered business, you normally must cancel your VAT registration. However, in certain circumstances, the new owner of your business can apply to keep your VAT registration number.
Finalizing your Income Tax while Selling Your Business
You must submit your Self-Assessment tax return by the due date. On the return, you must include the date you ceased trading.
Capital gains tax if you sell or dispose of assets
By selling your business if you can make a capital gain, then you must pay a capital gain tax. You can reduce the amount of tax by claiming Entrepreneurs relief.
When selling a partnership, your duties vary depending on whether you are selling:
- Your share of partnership
- The entire partnership
If you have any staff working for you, it is your responsibility to tell them about when and why you are selling the partnership and details about the redundancy terms and relocation packages that you will offer.
The new owner can transfer the VAT registration number to the partnership if it is registered for VAT.
- If you are selling your partnership stake, you must file a personal Self-Assessment tax return before the deadline.
- If you are selling the whole partnership, you must ensure that the ‘selected partner’ delivers a Partnership Tax Return before the deadline.
The tax you need to pay while Selling Your Business
When you terminate the partnership, you realize a “capital gain”. This means you need to pay capital gain tax, to reduce the amount of tax you can claim an entrepreneur’s relief. There are several other reliefs available which you can even claim.
Your responsibilities will vary depending on whether:
- You are selling your whole investment in your limited company.
- Or the firm is selling a portion of its operations.
Selling the entire shareholding
Appoint new directors or company secretaries.
- You must inform Companies House of the sale of your firm by amending your company’s registration data. To do this, you will need to:
- It is necessary to appoint a new director. Depending on the type of business, you may be responsible for nominating a director before resigning. Following the completion of the appointment, you must submit an AP01 form to Companies House
Capital gain tax.
A VAT-registered business can transfer its registration to a new owner.
When you sell a firm, you must submit a Company Tax Return for the accounting period that ends on the transaction date.. You must also pay Corporation Tax on earnings generated during that period, including chargeable gain from the sale of company assets.
If the company sells part of the business
It is advisable not to notify your employees, suppliers, or rivals that you want to sell your firm until everything is in place. Their emotions may have a detrimental influence on your company’s profitability.
When the time comes, tell your employees why and when the company is being sold, as well as if they will get a redundancy payment or be kept by the new owner.
It is also advised that you should not provide too much information to potential purchasers before doing thorough checks and putting non-disclosure agreements in place.
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