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.