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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am selling my limited company and the buyer wants to buy

Customer Question

I am selling my limited company and the buyer wants to buy the shares rather than goodwill/assets. What would my tax liability be?
Submitted: 2 years ago.
Category: UK Tax
Expert:  Tony Tax replied 2 years ago.
Can you tell me what type of business it is please. Did you set it up from scratch or incorporate from a sole trader business?
Customer: replied 2 years ago.
Hi. Set up from scratch 9 years ago. It's a limited company
Expert:  Tony Tax replied 2 years ago.
Leave this with me while I draft my answer. It will take a while so please bear with me.
Expert:  Tony Tax replied 2 years ago.
Hi again.
You should refer to HS275 below as part of this answer:
As your company was set up from scratch, I'm assuming the shares cost you very little. Therefore, when you sell them you will probably have a gain very close to 100% of the disposal proceeds.
Provided you and your company meet the qualifying criteria set out in HS275, you will be able to claim entrepreneurs' relief which will mean that the net taxable gain will be chargeable to Capital Gains Tax at 10% as opposed to the regular rates of 18% or 28% or a combination of the two rates depending on the level of your income in the tax year the gain is made. The first £11,100 of gains an individual makes in the current tax year will be tax free.
I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.
That's great - thank you. Will the business have any tax liability or is that not really relevant? So I am much better off selling my shares than my goodwill in essence?
Expert:  Tony Tax replied 2 years ago.
The company will have no liability from your disposal of the shares.
The goodwill is owned by the company, not you directly. You own the shares in the company. If the company sold the goodwill it would have to pay corporation tax at 20% on the gain. You would then have to go through a formal liquidation process if the cash in the company was more than £25,000 to get the cash out as capital as opposed to as a dividend (and a much higher tax liability) and to make a claim for entrepreneurs' relief. It's much easier to sell the shares, ie the company.
Customer: replied 2 years ago.
That's perfect. Thank you very much
Expert:  Tony Tax replied 2 years ago.
Would you mind rating my answer before you leave the site please.