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i am a veterinary surgeon, in a 50% partnership including

i am a veterinary surgeon...

i am a veterinary surgeon, in a 50% partnership including freehold in uk I am immigrating to new zealand in december and selling my 50 % of veterinary practice , possibly including buildings or rental income. I rang the tax office and tey told me if i sell my buisness after i have left the uk in the following tax year , provided i do not return yo live in uk in following 5 years, i dont have to pay capitol gains tax. My accountant says this is incorrect, that because i am a trade , i do have to pay capitol gains tax.

please could you advise:

1. which party is correct

2. any way of redusing tax (including tax on profits usually paid 12 months later)

3.can i sell my buisness this tax year, invest in the stockmarket as a new buisness, then sell shares in the next tax year to avoid capitol gains tax?

4.can i return to uk to visit relatives and if so work a few weeks to cover airfare costs?

Many Thanks

Ross XXXX

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Answered in 26 minutes by:
9/19/2013
Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15,956
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi.

1 Your accountant is correct. If you make a gain on the sale of assets including your share of the goodwill used in a business which operates in the UK, you are liable to CGT on the gain even if you are non-UK resident. You will, however, probably be eligible for entrepreneurs' relief which would restrict the CGT charge to 10% of the taxable gain. Read about ER in HS275.

2 When you cease to be a partner in the business, your tax return should show the date that your status changed and that will impact on your tax liability for the final tax year during which you are a partner. You won't need to make tax payments on account for a tax year after you have left the business unless you have other sources of UK income. You could pay pension contributions to reduce your UK tax liability on your share of any profits.

3 If you reinvest some or all of the proceeds of your share of the business into new business assets, you can effectively defer some or all of the CGT charge but you would lose out on entrepreneurs' relief on the initial deferred gain. Take a look at the business asset rollover relief rules in HS290. Entrepreneurs' relief may be available on the gain on a disposal of the new business.

As far as stock market businesses are concerned, you cannot defer CGT by buying shares in companies such as Barclays or Marks and Spencer. You can defer or eliminate CGT by investing in Enterprise Investment Scheme shares or Seed Enterprise Investment Scheme shares. These would be high risk investments, hence the tax breaks, and are really aimed at those who can afford to lose all of their investment. Read about EIS and SEIS here and here.

4 If you work in the UK, you would have to pay UK tax but only if your UK source income exceeded the personal allowance for the tax year concerned.

I hope this helps but let me know if you have any further questions.
Tony Tax
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Customer reply replied 4 years ago

Why did the inland revenue say that i was exempt from capitols gains tax?, they also referred me to their web site which had quite a lot about selling buisnesses and how you could be exempt from capitol gains

Many front line HMRC staff have limited knowledge I'm afraid. Most of the knowledgable staff with many years experience have left or taken redundancy. It's a shocking way for the UK's tax authority to be run.

The individual who said you were exempt probably did so because they were under the misapprehension that where you sell an interest in a UK business the tax treatment is the same as for the disposal of non-business assets such as rental property, your home or shares in companies. Take a look at questions 2 and 4 and their respective answers here.

If your business was run through a limited company in which you had shares you might be able to avoid CGT altogether if you sold you shares whilst non-resident. The reason for this is that it would be the limited company running the business, not you, albeit that is a fine line. Since the business assets are owned personally, it would probably be seen as aggressive tax avoidance and challenged by the tax office if you incorporated shortly before selling up but you should discuss this with your accountant.

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Hi again.

I believe you posted a peer review report in which you asked if you could avoid UK tax by investing in New Zealand. Peer review reports are for other experts to use, not customers like yourself I'm afraid.

In answer to your question, you will not get tax relief in the UK by investing in New Zealand I'm afraid. No government in the world would do that since it won't benefit in terms of taxes being paid as a result of that investment (in a business for example) where the taxpayer concerned was emigrating. Ask yourself why the UK tax system would subsidise investment in New Zealand. In short, it won't and it doesn't.
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