You should think carefully about the Inheritance Tax consequences if you are selling your business.
Whilst a business will usually benefit from 100% Business Relief for Inheritance Tax provided that you have owned it for at least two years before death, cash proceeds of a sale will be subject to Inheritance Tax.
Business Relief works by reducing the value of a business or its assets when working out how much Inheritance Tax has to be paid.
There are exceptions. You can’t claim Business Relief if the company:
mainly deals with securities, stocks or shares, land or buildings, or in making or holding investments
is a not-for-profit organisation
is being sold, unless the sale is to a company that will carry on the business and the estate will be paid mainly in shares of that company
is being wound up, unless this is part of a process to allow the business of the company to carry on
You can’t claim Business Relief on an asset if it:
wasn’t used mainly for business in the 2 years before it was either passed on as a gift or as part of the will
isn’t needed for future use in the business
also qualifies for Agricultural Relief
Are you thinking about selling your company? We work together with tax advisors and accountants to make sure that the sale is structured in a tax efficient way.