Parents selling their business

Mrs_Egg

My parents are both farmers and are planning on selling up the family business and semi/full time retire. They are not really savy business people when it comes to taxes etc... basically they have an accountant who tells them to pay X ammount each year and they do so. I'm not much help either as i get paid via PAYE system at work so... here I am asking you lovely lot!

So this is where we are, the Farm is for sale via an estate agents who take X ammount fee for final sale (1%) and solicitor takes (2%) (these are estimates but somewhere close) but as for how much they would be realistically be expecting after tax etc.. is what i am trying to work out.

The farm includes working buildings, a farm house (which they have been renting out as they live in another building next to the site) and arable land if that makes any difference.

My mum and dad are the only workers on the farm, the company is registered for VAT.

They won't be investing any money into another business but they may buy another house and rent out the one they live in.

The offer they have had is 1.6 million.

I'm thinking as a rough estimate would it be 40%?

Sorry if there isn't enough information here to help.

zygurat789

They're in business so they are entrepreneurs and there is a special relief for them. I hope they are both 50/50 partners in the business, if not then do it quick.
First what did they pay, or the deemed cost of the farm when they took it over? This taken from the net sale proceeds gives a profit chargeable to capital gains tax. Each of them has an exempt allowance of £10,600 and then there is a once only allowance of £1m (entrepreneur's relief) which is taxed at 10%, any unused allowance may be carried forward, if required
They should deinitely ask their accountant to do projections and idea's before any sale takes place.

kidmugsy

There's special relief from Inheritance Tax for farming property or strictly, I suppose, farming businesses. They might care to enquire. I'll bet NFU advise a lot on this.

somethingcorporate

http://www.hmrc.gov.uk/helpsheets/hs275.pdf

This is HMRCs note on entrepreneurs relief. It appears to be £10m, not £1m (I may be wrong, I have not read it in full).

zygurat789

somethingcorporate wrote: »

http://www.hmrc.gov.uk/helpsheets/hs275.pdf

This is HMRCs note on entrepreneurs relief. It appears to be £10m, not £1m (I may be wrong, I have not read it in full).

Yes tha's right. If you want a tax haven look no further than the UK (that's if you are rich)

And that would be £10m each, more than is needed by the OP

laurel7172

2% of £1.6 million *for the solicitor*???

Are you sure?

zygurat789

kidmugsy wrote: »

There's special relief from Inheritance Tax for farming property or strictly, I suppose, farming businesses. They might care to enquire. I'll bet NFU advise a lot on this.

Are you referring to Business property relief on TRADING businesses ?

lovinituk

laurel7172 wrote: »

2% of £1.6 million *for the solicitor*???

Are you sure?

It costs more in ink to write all those extra 0's

agrinnall

I know nothing about the reliefs but zygurat is definitely right that they should be asking their accountant about this, who will presumably already have full details of the property so that specific advice can be given rather than the generic advice which is all that can be given on here.

somethingcorporate

Rather than an accountant who may not specialise in this kind of thing, you may want to talk to a tax adviser who does. There is a qualification called Chartered Tax Adviser (CTA) that tends to be a bridge between lawyers and accountants (CTAs tend to come from one profession or the other). See if you can find one of these.

A couple of grand invested upfront in advice *could* save you hundreds of thousands for such a large transaction.

Mrs_Egg

Thanks for you all for your quick replies and all your help and advice.

Their accountant is on holiday at the moment so haven't been able to as him advise but are trying to get in contact with him, they didn't think they would have recieved an offer so quickly and wanted rid regardless.

The business is split 51/49% I don't suppose that will make much difference?

I could be wrong on the solicitors fee, I really have no idea but i feel i may be in the wrong profession if not :eek:

Thanks somethingcorporate for the CTA tip, ill have a look into this.