Capital gains tax

SPITAKIMUS14_2

Hi all

Another thread got me thinking
We jointly own a property (shop that we run a business from)which if sold would give us approx £188000 profit:D
But what can i expect to pay in tax ???:eek:
owned it for almost 11 years ..

Rolo_Tomasi

Assuming the shop and the business were owned by the same person (or people) then if you were to sell the business (which includes the property) you can claim entrepreneurs relief which means the tax due would be approximately 10% of the profit.

SPITAKIMUS14_2

Bussiness is a limited company with my other half and myself as directors .
The building is jointly owned by ourselves .
would this still be viable ?

Rolo_Tomasi

Do you rent the building to the Limited Company? If so then I do not think the profit made on the building would qualify for the 10% tax - you would pay CGT at 18% on this part of the gain.

With regards to the company, provided you sold your shares in the company then any profit on these would be taxed at 10%.

SPITAKIMUS14_2

Rolo_Tomasi wrote: »

Do you rent the building to the Limited Company? If so then I do not think the profit made on the building would qualify for the 10% tax - you would pay CGT at 18% on this part of the gain.

With regards to the company, provided you sold your shares in the company then any profit on these would be taxed at 10%.

Yes at a pepercorn £1000 a year

James,_Oxford

that's one expensive peppercorn

Pennywise

Agree with everything Jimmo says, but I have a few more points to raise.

1. When you say £188k "profit" - have you followed the CGT rules as to what constitutes the "profit". It should be sale price less costs of disposal, less purchase price plus costs of acquisition, less any capital expenses on the property over the years, i.e. improvements etc. I only point this out as a lot of people have a strange misunderstanding that the "profit" is the proceeds less the mortgage/loan which is completely wrong.

2. Are you selling the business and the premises at the same time. If so, your limited company will be taxed on the goodwill "profit" and you may have balancing charges on the capital allowances. Your total sale proceeds will have to be split between property (separate legal agreement as different seller), goodwill, fixtures & fittings, stocks, etc. Then, after paying corporation tax on the company's "profits" on sale, you have to think how to get the money out of the company to you both - either dividends, salary, or a capital distribution subject to CGT if you close down the company.

With the figures quoted, you really need to be getting advice from a good accountant and solicitor as you may be able to "structure" the sale to reduce your overall tax liabilities - i.e. a different apportionment between goodwill, premises, stocks, F&F, or the purchaser buying your shares hence keeping the company, etc.