Selling a business can be expensive, complicated and time-consuming, and may also have significant tax implications, so you need to plan carefully and get the right advice at an early stage. In this series of briefings, we will explain the full process of how to sell your business.

Tax issues

On the sale of the business, the seller will have to pay tax, calculated by reference to the increase in the value of the shares or assets since the seller acquired them, subject to any tax reliefs or tax mitigation available to the seller.

There are various ways for a seller to mitigate this tax liability.

The different methods of mitigation will depend on whether the seller is an individual or a corporate entity, and whether the sale is of shares or assets. Indeed, in an asset sale, a different tax treatment may apply to different types of assets. The rate of tax payable will in some cases depend on how long the seller has owned the shares or assets. The seller’s tax liability may also be reduced by pre-sale restructuring (see ‘Getting started’) and can be mitigated or delayed by the seller taking shares in the buyer or loan notes from the buyer, rather than being paid the whole price in cash.

The tax issues arising on the sale cannot be covered in detail in this bulletin, but the potential tax liability may be considerable, so you must get the right advice from your solicitor or accountant at an early stage.

Click here to read the full briefing series: Selling a business.